Turning the page

Euro-zone ministers declare Greece’s long-running debt crisis over

Greek Prime Minister Alexis Tsipras said yesterday that the country was “turning a page” after euro zone ministers declared its crisis over as they granted Athens debt relief under a bailout exit strategy.

The agreement comes nearly a decade after Athens finances spun out of control, sparking three bailouts and threatening the country’s euro membership.

“On Thursday we reached a historic agreement on Greece’s debt with the Eurogroup,” Tsipras told the country’s president, Prokopis Pavlopoulos.

“We are turning a page,” he said, adding that Greece had to remain on the path of reform.

Following the euro zone ministers’ hard-fought agreement declared earlier yesterday, Greece is slated to leave its third financial rescue since 2010 on August 20.

The deal was expected to be an easy one, but last-minute resistance by Germany — Greece’s long bailout nemesis and biggest creditor — dragged the talks on for six hours.

The ministers agreed to extend maturities by 10 years on major parts of its total debt obligations, a mountain that has reached close to double the country’s annual economic output.

They also agreed to disburse €15 billion ($17.5 billion) to ease Greece’s exit from the rescue programme. This would leave Greece with a hefty €24 billion safety cushion, officials said.

“The agreed debt relief is bigger than we had expected,” Citi European Economics said in a note. “In particular, the 10-year extension of the EFSF loans’ maturity and most importantly the grace period on interest payments is a significant development.”

“The government is happy with the agreement,” Greek Finance Minister Euclid Tsakalotos said after the talks.

“But to make this worthwhile we have to make sure that the Greek people must quickly see concrete results... they need to feel the change in their own pockets,” he added.

The eight-year crisis toppled four governments and shrank the economy by 25%. Unemployment soared and still hovers over 20%, sending thousands of young educated Greeks abroad.

Optimism is tempered by Greece’s remaining fiscal obligations, which will demand serious discipline, observers say.

“This is a very tight programme. A surplus of 3.5% to 2022 and 2.2% (on average) to 2060 is not easy at all,” Kostas Boukas, asset management director at Beta Securities, told Athens 9,84 radio.

“We’ll have to see if the pledges will be kept, especially as they depend on international developments as well,” he said.

Under pressure from its creditors, Greece has already agreed to slash pensions again in 2019, and reduce the taxfree income threshold for millions of people in 2020.

Further cuts will be made to maintain the 3.5% surplus, if necessary.

“It would be a terrible mistake to cultivate illusions that the end of the bailout means a return to normality,” said proopposition daily Ta Nea.

“What follows is tough oversight which no other country has experienced in a post-bailout period,” the daily said.

The European Commission has already specified that Greece will remain under fiscal supervision until it repays 75% of its loans.

Athens has received €273.7 billion in assistance since 2010, enabling it to avoid punishing borrowing rates on debt markets.

The International Monetary Fund, led by the tough-talking Christine Lagarde, welcomed the debt relief, but cited reservations about Greece’s obligations over the long term.

“In the medium term analysis there is no doubt in our minds that Greece will be able to reaccess the markets,” she said after the talks. “As far as the longer term is concerned we have concerns.”

The reform-pushing IMF played an active role in the two first Greek bailouts, but took only an observer role in the third in the belief that Greece’s debt pile was unsustainable in the long term.