Greece due to exit bailout in August: creditors | Business| Economy and finance news from a German perspective | DW | 27.04.2018
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Greece due to exit bailout in August: creditors

At a meeting in Sofia, eurozone finance ministers agreed that Athens was on track to exit from eight years of bailouts. But deep divisions persist over how to boost growth and make sure Athens implements reforms.

Greece is likely to reach a final deal on June 21 to allow it to fully exit its international bailout in August, its creditors said following a meeting on Friday in Bulgaria's capital, Sofia.

European Union Finance Commissioner Pierre Moscovici said Greece was essentially on track to meet its reform commitments, "but there are still a few efforts to be conducted," including the handling of banks' soured loans and property foreclosures.

Greek Finance Minister Euclid Tsakalotos reiterated that Athens does not wish to request a precautionary credit line after its bailout program expires, but acknowledged that there will be enhanced surveillance by its lenders in the post-bailout period.

Final review next month

Tsakalotos said that the country's lenders will return to Athens for talks on the country's final bailout review in mid-May.

At the meeting were the finance ministers of the EU's 19-member eurozone, who need to agree in June that Greece has met its obligations, so that the debt-saddled country can return to borrowing money on the bond market.

Read more: Greeks stuck in lousy, part-time jobs as government claims success

Greece is preparing to return to market financing on August 20 after more than eight years of living on cheap loans provided by its creditors from the European Central Bank (ECB), the euro area rescue fund, ESM, and the International Monetary Fund (IMF).

Under three different bailout programs, they granted a total of €260 billion in financial aid since 2010, after investors at the time had refused to lend to Athens because of its ballooning deficit and debt.

Once the bailout ends, Greece will be free to set its own economic policy, which will mark a political turning point for the country that has been forced to implement highly unpopular reforms.

Ahead of Friday's talks, German Finance Minister Olaf Scholz indicated that Berlin may soften its hardline stance on further debt relief to Athens, saying Greece was in a much better position now. "There can be a much more optimistic view of Greece today than a few years ago," Scholz said.

To keep a degree of control over Athens' policies, some eurozone members have been pressuring Greece to ask for a precautionary credit line from the ESM rescue fund, which would entail conditions on Athens. But the left-wing government of Alexis Tsipras has resisted such suggestions.

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Debt cut for progress on reforms

There have been persistent differences in recent months among eurozone members and the International Monetary Fund (IMF) over how much leeway to give and how much supervision should continue.

There is no discussion of a reduction of the nominal value of the debt, but Greece might get back the profits made by the ECB on its portfolio of Greek bonds and see maturities and grace periods on eurozone loans extended.

French Finance Minister Bruno Le Maire told reporters before the meeting that the framework on debt relief must be "clear, comprehensive and credible" for the financial markets. "I am confident that we will be able to find an agreement on that in the coming weeks," he said.

Before Athens is granted such relief, however, it needs to implement the final 88 changes to its economy agreed with its creditors. Some of them, like the liberalization of the energy market, or privatization, are difficult.

"We are still waiting for some more decisions and some more actions from Greece, but we are confident that we will find an agreement ... in June," said Portugal's Mario Centeno, who chairs the summits as the head of the finance ministers' group, also known as Eurogroup.

Without those "prior actions," Greece won't get a cash injection in August to keep it liquid in case of difficulties, nor can it hope for debt relief.

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Growth link

To reassure the eurozone Athens wants to continue down the path of reforms, Greek Finance Minister Euclid Tsakalotos presented a strategy for boosting economic growth in the coming years.

Read more: Despite the data, little relief felt by ordinary Greeks

Under pressure from creditors, Greece has turned its 15 percent budget deficit in 2009 into a budget surplus of 0.8 percent last year. But many officials are worried that as time passes, Greek politicians might return to public-sector profligacy.

Eurozone officials will therefore seek to link some of what they consider sound policy goals — like a primary surplus, excluding debt servicing, of 3.5 percent of gross domestic product (GDP) until 2022 — to the debt relief deal.

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mm,uhe/aos (Reuters, dpa, AFP)

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