Greece de­ci­sions to be made in July

IMF warns Europe’s debt cri­sis has po­ten­tial to crush re­gion’s out­look un­less ef­forts are picked up

Kathimerini English - - Focus -

As the In­ter­na­tional Mon­e­tary Fund called for faster ac­tion on the eu­ro­zone’s debt cri­sis, Euro­pean Union fi­nance min­is­ters agreed dur­ing a meet­ing yes­ter­day that they would de­cide in early July the main out­lines of a sec­ond bailout for Greece, in­clud­ing pri­vate sec­tor con­tri­bu­tions.

“We have agreed to­day that the con­tri­bu­tion [of the pri­vate sec­tor] must be vol­un­tary, but... Greece also has to de­liver,” said the head of the Eurogroup, Jean-Claude Juncker.

“If you aim for a vol­un­tary pri­vate con­tri­bu­tion, you can’t fix what size it must be be­fore­hand. That also has to be dis­cussed with pri­vate cred­i­tors.”

Juncker also em­pha­sized that Greece had to keep its side of the agree­ment by pass­ing fur­ther aus­ter­ity mea­sures.

New emer­gency talks for a sec­ond bailout for Greece were set for July 3.

In a call to pick up the pace of de­ci­sions be­ing made on Greece, the IMF warned yes­ter­day that Eu- rope’s debt cri­sis has the po­ten­tial to crush the other­wise pos­i­tive eco­nomic out­look for the re­gion un­less pol­i­cy­mak­ers step up ef­forts to re­solve it.

“A broadly sound re­cov­ery con­tin­ues, but the sov­er­eign cri­sis in the pe­riph­ery threat­ens to over­whelm this fa­vor­able out­look, and much re­mains to be done to se­cure a dy­namic and re­silient mon­e­tary union,” the Wash­ing­ton-based fund said in a state­ment.

“Fail­ure to un­der­take de­ci­sive ac­tion could rapidly spread the ten- sions to the core of the euro area and re­sult in large global spillovers.”

The IMF said pol­i­cy­mak­ers should scale up Europe’s res­cue fund and ex­tend its po­ten­tial uses “to sec­ondary mar­ket pur­poses and term fund­ing guar­an­tees.”

That echoes pro­pos­als by the Euro­pean Cen­tral Bank, which wants the res­cue fund to pur­chase gov­ern­ment bonds on the sec­ondary mar­ket.

Mean­while, euro-area gov­ern­ments stripped their per­ma­nent debt cri­sis mech­a­nism of pre­ferred- cred­i­tor sta­tus for any loans to Greece, Ire­land and Por­tu­gal to help the coun­tries re­turn to bond mar­kets. They also ex­panded their cur­rent 440-bil­lion-euro fund.

The de­ci­sion by fi­nance min­is­ters marks a pol­icy re­ver­sal from a March agree­ment to give the Euro­pean Sta­bil­ity Mech­a­nism pre­ferred sta­tus cov­er­ing aid for all euro-area coun­tries.

Such se­nior­ity would have given the ESM, due to be es­tab­lished in mid-2013, pri­or­ity over pri­vate in­vestors in any pay­out af­ter a de­fault.

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