Eurozone mulls Greece debt relief, fresh aid
Under pressure from the IMF, eurozone finance ministers will consider major debt relief and fresh aid for Greece yesterday despite the deep reservations of bailout-weary Germany.
Ministers from the 19-member single currency bloc must confront the sensitive topic at talks in Brussels after Greek lawmakers fulfilled the eurozone’s latest demands for painful reforms last Thursday. The vote in parliament, which was met by angry protests, satisfied the conditions of Greece’s bailout and opened the way for debt relief as well as fresh loans so that Athens can repay loans of 7.0 billion euros ($7.8 billion) in July. “Our country... has fulfilled its obligations totally and on time,” Greek Finance Minister Euclid Tsakalotos said on Sunday ahead of the crunch talks, which begin in Brussels at 1300 GMT.
“There is no excuse for further delay on the issue of the debt relief,” he said. Newly elected French President Emmanuel Macron said he backed debt relief for Greece in a phone call with Greek Prime Minister Alexis Tsipras. Macron told Tsipras he was in favor of “finding a deal soon to alleviate the weight of Greece’s debt over time,” a statement from the presidency said.
But Macron’s position puts him at odds with Germany where Greek debt relief following three different bailouts since 2010 — is seen as a vote loser ahead of general elections in September. Greece’s debt stands at a towering 180 percent of annual output, the legacy of a crisis that brought panic to the markets and nearly forced the country out of the eurozone. Germany has led several eurozone governments that have dragged their heels on tackling the debt mountain over the long term, insisting on more reforms before doing Athens further favours.
‘Strong willingness’
In opposition to Berlin is the International Monetary Fund, which has made more debt relief a condition of taking part in Greece’s third and latest 86-billion-euro ($94-billion) bailout. “We have to find a scenario on debt that holds for years to come and that everyone can accept, including the IMF,” an EU diplomat said on condition of anonymity.
The discussion will be “rather difficult and long,” the diplomat said. Led by tough negotiator and former French finance minister Christine Lagarde, the IMF says Greece’s debt is unsustainable and will be “explosive” in the long run, requiring a more ambitious plan from Europe. This would include dramatically extending grace periods and maturities on the loans far beyond what the eurozone has committed to so far.
The question has served as a point of contention for months between the IMF and the eurozone’s most influential official, German Finance Minister Wolfgang Schaeuble. Schaeuble opposes debt relief, but at the same time refuses to unlock more loans to Greece without the partnership of the IMF, which he sees as a guarantor of financial rigor. “I feel a strong willingness by all parties without exception to reach an overall deal,” the EU’s Economic Affairs Commissioner Pierre Moscovici told a news briefing. The meeting will be the first for French Finance Minister Bruno Le Maire, named to his post last week by Macron, a pro-EU centrist. Le Maire attends the Brussels talks after a morning stop in Berlin where he met Schaeuble to discuss the future of the eurozone. Germany and France are Greece’s biggest lenders.
Tsipras earlier this month grudgingly accepted the need to legislate more spending cuts to unlock the cash and win debt relief.