Greece's creditors agree public debt relief breakthrough
Eurogroup finance ministers and the International Monetary Fund agreed early Wednesday morning in Brussels on what has been hailed as a debt relief "breakthrough" for Greece.
In an 11-hour meeting, Eurogroup finance ministers said Greece had met required commitments to get fresh aid to prevent defaults on debt redemptions to the IMF and European Central Bank in July.
“On the package of reforms Greece had committed to last summer, we now have full agreement,” said Jeroen Dijsselbloem, the Dutch finance minister who is president of the Eurogroup.
Greece will receive €10.3bn in new loans beginning with a €7.5bn installment in the second half of June.
The creditors also agreed on measures to provide short, medium and long-term debt restructuring on Greece’s 180% of GDP debt.
In a statement, the Eurogroup said:
The Eurogroup agreed today on a package of debt measures which will be phased in progressively, as necessary to meet the agreed benchmark on gross financing needs and will be subject to the pre-defined conditionality of the ESM (Euro Stability Mechanism rescue fund) programme.
"We achieved a major breakthrough on Greece which enables us to enter a new phase in the Greek financial assistance programme," Dijsselbloem told a news conference. "This is stretching what I thought would have been possible not so long ago."
Euclid Tsakalotos, Greek finance minister, said he saw “some ground for optimism” for turning “Greece’s vicious circle of recession-measures-recession into one where investors have a clear runway to invest.”
The Wall Street Journal commented that Wednesday’s deal required all key parties in the negotiations to let go of some of their demands and go further on other elements than they had said was possible: Greece had to adopt more austerity than it had signed up for last summer; Germany had to promise more measures to ease Greece’s payment burden; and the IMF had to accept that the most important debt-relief measures wouldn’t be enacted until at least 2018, when Greece’s current bailout deal ends.
Among the issues that will be discussed in 2018 are caps and deferrals on interest rates as well as the return to Athens of profits from Greek government bonds held by Eurozone central banks, Dijsselbloem said. The Euro Area may also use leftover funds from its own bailout to repay earlier other official loans, for instance from the IMF.
Postponement of these steps had been a key condition by Germany and other Eurozone hawks, which are reluctant to debate Greek debt relief in their parliaments at the moment. Crucially, the deal delays a vote on debt relief in Germany’s Bundestag until after general elections in 2017.
Pic above: Wolfgang Schäuble (c), Germany's powerful finance minister, at the Tuesday/Wednesday meeting in Brussels.