BRUSSELS – European finance ministers on Monday debated for the first time measures to ease Greece’s massive debt burden amid concern the International Monetary Fund might withdraw from the bailout talks.
At talks in Brussels, ministers from the 19-nation euro single currency bloc discussed short, medium and long-term measures that could be taken to help Greece, but they refused to consider any outright debt haircut.
Greece’s debt was predicted to stand at more than 333 billion euros ($379 billion) this year – around 180 percent of its gross domestic product – and the IMF believes that primary surplus targets set by its creditors to secure billions of euros in rescue loans will be too tough to respect.
Until now, eurogroup countries have balked at discussing debt reduction until a long-delayed review is completed into how effective Greece has been in implementing austerity measures to secure last year’s 86-billion euro ($98 billion) rescue package.
But eurogroup chairman Jeroen Dijsselbloem conceded on Monday that “it is fair to assume that there will be debt sustainability issues” for Greece in the years ahead.
He said the ministers discussed short-term steps to optimize the management of Greece’s debt, medium-term measures like longer payment and grace periods once the current program ends in 2018, and to assess if additional measures are needed in the years after 2018.
Dijsselbloem said it is “too early to say” whether the measures discussed would satisfy the IMF. He said that technical level talks would flesh out the measures in coming weeks and that he hoped further progress could be made when the ministers meet again May 24.
Time is of the essence for Greek Prime Minister Alexis Tsipras, whose government has to make a 2.3 billion euro debt repayment in July.
Tsipras welcomed the eurogroup decisions.
“In essence, the review is ending without additional (austerity) measures … and it’s particularly positive that a roadmap is being created for vital debt relief,” he said in Athens, after informing Greek President Prokopis Pavlopoulos and opposition party leaders about developments.
“It’s a positive message for investors and the markets but also for the Greek people – especially those in the middle and lower income levels for carried a great burden. They deserve some good news,” Tsipras said.
Back in Brussels, Greek Finance Minister Euclid Tsakalotos expressed relief that debt talks had finally happened.
“It’s a great relief that we are now talking about the specifics,” he told reporters after the meeting.
“I think not everything has been sorted out but a lot of things have been sorted out and there is every expectation that all these jigsaw pieces will come together by May 24,” he said.
The IMF wants the eurozone states to agree to write off some of the money Greece owes them. Many states, led by Germany, have so far rejected that notion, though they could look to help Greece by extending debt repayment dates and lowering interest rates further.
“Haircuts are off the table,” insisted Finland’s finance minister, Alexander Stubb.
The bailout agreed last year is Greece’s third since 2010. But a review of how effective Athens has been in making required austerity measures was supposed to have been completed six months ago.
The ministers signaled their readiness to back the next tranche of loan money for Greece, with Dijsselbloem saying that technical work on the review could probably be completed in coming weeks.
The eurogroup meeting comes after Greece’s parliament approved Sunday a reform of the pension and tax systems. The reform, which would raise social security and pension contributions and hike taxes for many people, has run into fierce resistance from unions, which have launched repeated protests and walkouts – including a three-day general strike since Friday.
Greece’s economy has been hammered by six years of budget cuts that were required by creditors to reduce the country’s public debt load. The country has needed bailout loans since it was locked out of international borrowing markets in 2010 amid investor worries about its public finances. About a quarter of the workforce is now unemployed.
Greek Labor Minister George Katrougalos has said the government would not accept “additional actions” to reduce government spending beyond what it agreed to last summer, when Athens abruptly abandoned its anti-bailout policies and signed up to the third bailout. It only did that after defaulting on its debt payments – which could happen again this summer without progress in the bailout negotiations – and to avoid a catastrophic exit from the eurozone.
The IMF wants Greece to agree to the additional budget actions, which would be taken in case it misses its targets, but Greece and its other eurozone creditors are against that. The ministers discussed a “contingency” mechanism of additional measures that could kick in, should Athens fall short.
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