After an 11-hour meeting in Brussels which ended in the early hours of Wednesday morning, eurozone finance ministers agreed to release two tranches of funds, €7.5bn in June and €2.8bn in September, and to implement measures to ease Greece’s €321bn debt mountain in a number of stages.
Advertisement
“This is an important moment in the long Greek programme, an important moment for all of us, since last summer when we had a major crisis of confidence between us”, Dijsselbloem told a press conference.
This review was the first under Greece’s third eurozone bailout, secured in August past year, after which Prime Minister Alexis Tsipras called a snap election.
But crucially for keeping an increasingly sceptical International Monetary Fund on board, Djissebloem said the ministers had also agreed to phase in debt relief for cash-strapped Athens.
The Eurogroup meeting also achieved a “major breakthrough” on the issue of Greece debt relief, which had been a key demand by the International Monetary Fund.
The IMF had warned Greece’s public debt was unsustainable at current levels of about 180% of its gross domestic product.
The assessment will not be ready before the autumn, leaving the door open to new debt talks between the IMF and the European Union before a final decision by the fund’s executive board.
The first disbursement of 7.5 billion euros ($8.4 billion) could already begin by the middle of next month with other disbursements coming after the summer, pending positive feedback from European institutions.
“In a spectacularly sophisticated show of kicking the can down the road, debt relief will be considered – later”.
Eurogroup President Jeroen Dijsselbloem confirmed that an agreement has been reached to greenlight €10.3billion ($11.5bn) in bailout loans to Greece.
“We have now an agreement not only on the review and the structural measures, but on debt”.
Just recently, the Syriza and Independent Greeks coalition government passed a series of unpopular measures: rising value-added tax from 23 to 24 percent; extra taxes on fuel, tobacco and alcohol; plus the creation of a new privatization fund.
But Germany believes a detailed discussion on debt relief can be held later, and should be made conditional on Greece’s progress with reforms and on data.
But a bigger advance was an offer by which the euro zone agreed to provide Athens financial obligation relief in 2018 if that is essential to fulfill agreed requirements on its payments burden.
Advertisement
“I think it was a really important step”, Dijsselbloem said. The IMF argued that unless Athens goes ahead with the reforms, Greece can not achieve a 3.5 percent primary surplus target in 2018, set both as condition for its participation in the bailout. “I do not see this as a weakening of the debt relief proposals”, he said.
