Eurozone finance ministers reached a vital deal with Greece after marathon talks Wednesday to unlock 10.3 billion euros in bailout cash and start debt relief for Athens as demanded by the International Monetary Fund.
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In an 11-hour overnight meeting in Brussels, finance ministers from the 19 eurozone countries approved Greece’s latest tax hikes and reform measures, a process that was first meant to have been concluded last October. The International Monetary Fund which was represented by its Director of the European Department, Poul Thomsen, effectively agreed to stay on in the Greek bailout program following the Eurogroup’s commitment to offer debt relief to Greece.
The extension of further tranches of the €86 billion programme agreed last summer came two days after the Greek Parliament approved more spending cuts and tax increases mandated by the country’s worldwide creditors.
It has already fallen behind in paying for everyday government duties and wages.
We foresee that the move should be sufficient to allow Euro zone finance ministers to sign off a EUR 3.5 billion bailout payment to Greece when they meet in Brussels tomorrow.
Germany has been insistent that the IMF should take part in the bailout since the Fund’s reputation for financial rigor, however it has also resisted demands from Washington for financial obligation relief- a relocation that Berlin worries would produce a “ethical danger”, providing euro zone debtors an incentive to break with austerity reforms.
A deal to avert a looming Greek bankruptcy seemed to raise more questions than answers among worldwide commentators amid a public rift between two of Athens’ key creditors: the global Monetary Fund (IMF) and euro zone leaders.
Mutual trust was returning to the talks, he said, almost a year after Tsipras’s rejection of austerity measures pushed Athens close to be pushed out of the euro.
But Germany, the EU’s economic engine, has been opposed to any form of debt relief, or “haircut”, insisting Athens must undertake wider fiscal and structural reforms before European Union creditors agree to reduce Greece’s debt burden.
The IMF proposal was opposed by Germany, which on the other hand said it would not accept that the bailout continues without the IMF.
The IMF also signalled that it could join the bailout by the end of 2016 following a debt-sustainability analysis. Germany is particularly averse to the possibility of debt relief for Greece.
“Now, it’s their turn”, said Greek Prime Minister Alexis Tsipras.
The hugely unpopular moves with the Greek public went a long way to convince the country’s creditors that Athens might be finally getting serious about undertaking hard reforms and smoothed the way for today’s agreement.
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The IMF darkly added that, without restructuring, the debt load could soar to as much as 250 percent of output by 2060.
