Eurozone finance ministers reached a vital deal with Greece after marathon talks Wednesday, May 25, to unlock 10.3 billion euros ($12 billion) in bailout cash and start debt relief for Athens as demanded by the International Monetary Fund.
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“I think there is some ground for optimism that this can be the beginning of turning Greece’s vicious circle of recession-measures-recession into one where investors have a clear runway to invest in Greece”, Greek finance minister, Euclid Tsakalotos, told reporters as he left the Brussels meeting, according to Reuters.
“This opens the way for a return of confidence that is so essential for lasting economic recovery in Greece, which is our common goal”, said Moscovici.
On Sunday, the Hellenic Parliament approved a bill aiming to satisfy creditor demands ahead of the Eurogroup meeting, adopting a contingency mechanism that allows the government to slash spending further if needed, as demanded by the Eurogroup.
Greece’s global creditors remain deadlocked over how to reduce the recession-hit country’s €321bn (£245bn) debt mountain, worth 180% of annual economic output.
Forecasts suggest the country’s debt load is set to exceed €333bn (£254bn) this year – a sum which is 180% of its yearly economic output.
“Greece needs room to breathe, it needs certainty”, French finance minister Michel Sapin said.
The deal also includes the prospect of debt relief for Athens in the form of lower interest rates and an extension on loan repayment deadlines if it is needed in the future.
Germany has been insistent that the IMF should take part in the bailout because the Fund’s reputation for fiscal rigour, but it has also resisted demands from Washington for debt relief – a move that Berlin fears would create a “moral hazard”, giving euro zone debtors an incentive to break with austerity reforms.
After late-night talks in Brussels, the ministers agreed to unlock 10.3bn euros ($11.5bn; £7.8bn) in new loans. “What we can look at is the annual debt burden, so Greece can on an annual basis pay its debts. If not, we are ready to help them in the coming years”.
In a hard-hitting assessment published on the eve of the meeting, the International Monetary Fund said Greece had no chance of meeting the terms of its current bailout plan without debt relief. Doing so may result in civil and/or criminal penalties.
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