US Trea­sury chief stresses need for Greek debt re­lief

The Pak Banker - - COMPANIES/BOSS -

US Trea­sury Sec­re­tary Ja­cob Lew stressed Thurs­day the im­por­tance of mak­ing Greece's debt sus­tain­able, prais­ing the coun­try's progress in re­form­ing its econ­omy as part of its in­ter­na­tional bailouts but urg­ing it to con­tinue im­ple­ment­ing the nec­es­sary mea­sures.

Speak­ing in Athens after talks with Greek Fi­nance Min­is­ter Eu­clid Tsakalo­tos, Lew said fur­ther progress on re­forms was im­por­tant so Euro­pean cred­i­tors could be­gin dis­cus­sions with the In­ter­na­tional Mon­e­tary Fund on "the tim­ing and de­tails of debt re­lief." "Putting Greece's debt on a sus­tain­able path is crit­i­cal to Greece's long-term eco­nomic health and I en­cour­age all par­ties to be flex­i­ble to suc­cess­fully con­clude this fall's ne­go­ti­a­tions," Lew said.

Greece has been de­pen­dent on res­cue loans from other eu­ro­zone coun­tries and the IMF in three bailouts since 2010, after mas­sive debt and a loss of in­vestor con­fi­dence in the coun­try's abil­ity to re­pay it left it locked out of bond mar­kets.

To qual­ify for its bailout loans, suc­ces­sive gov­ern­ments have had to im­ple­ment aus­ter­ity mea­sures and re­forms, in­clud­ing in the la­bor mar­ket, pen­sions and so­cial se­cu­rity, as well as rais­ing taxes and sell­ing off state as­sets. The re­forms have come at a high cost, with Greece's econ­omy con­tract­ing by a quar­ter and leav­ing un­em­ploy­ment hov­er­ing at around 25 per­cent.

Mak­ing the coun­try's debt sus­tain­able in the long term has been a key is­sue, with Greece in­sist­ing it needs a re­struc­tur­ing of its bor­row­ings, which are now mainly made up of loans from other coun­tries and the IMF.

"Our po­si­tion has been clear for quite some time that it's im­por­tant for debt re­struc­tur­ing to be part of an over­all plan for Greece" and for the coun­try's eco­nomic fu­ture, Lew said, adding that achiev­ing debt sus­tain­abil­ity and sta­bil­ity were key to en­sur­ing a re­turn to long-term eco­nomic growth.

The IMF, which has yet to com­mit to Greece's third bailout pro­gram, has ar­gued strongly in fa­vor of debt re­lief for Greece and has sug­gested the fore­casts un­der­pin­ning the Greek bailout plan are too op­ti­mistic.

Al­though eu­ro­zone cred­i­tors have ruled out an out­right cut in Greece's debt, the re­pay­ment timetable for loans could be ex­tended and in­ter­est rates could be re­duced.

Lew stressed it was key for the coun­try to con­tinue im­ple­ment­ing the re­forms it has com­mit­ted to.

"There's still more work to do.... And I think the chal­lenge that Greece is un­der­tak­ing is a sig­nif­i­cant one," the trea­sury sec­re­tary said. "But com­plet­ing the work, con­tin­u­ing to im­ple­ment pri­va­ti­za­tion, do­ing the work that's needed to ad­dress the non-per­form­ing loans will very much strengthen the po­si­tion that Greece brings in to a ne­go­ti­a­tion in the com­ing months."

Lew was also meet­ing with Greek Prime Min­is­ter Alexis Tsipras and other gov­ern­ment of­fi­cials be­fore head­ing to China for a meet­ing of G-20 fi­nance min­is­ters and cen­tral bank gov­er­nors.

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