Brussels/Lisbon: Euro-area finance ministers gathering in Brussels on Monday failed to break an impasse on debt relief for Greece, delaying the completion of the country’s bailout review and the disbursement of fresh loans needed to repay obligations in July.
After nearly eight hours of talks and multiple draft compromises, Athens and its creditors couldn’t reach an accord that would ease Greece’s debt and that would convince the International Monetary Fund (IMF) to agree to help finance the country’s bailout.
“The Eurogroup held an in-depth discussion on the sustainability of Greece’s public debt but did not reach an overall agreement," said Jeroen Dijsselbloem, the Dutch finance minister who presides over meetings with his euro-area counterparts. Work will continue in the coming weeks with the aim of reaching a conclusion on 15 June at the next meeting of ministers, he said.
The IMF has been seeking more debt relief for the country, pushing euro-area creditors to ensure the sustainability of Greece’s €315 billion ($354 billion) of obligations before it participates in the program. Some nations including Germany object to a debt restructuring while also insisting that the Washington-based fund join the program to lend credibility to the bailout.
Greek and EU officials said that a proposed final compromise was considered too vague by the Athens delegation, which rejected the draft plan arguing it wouldn’t bring sufficient certainty on the country’s debt prospects.
“The feeling was at the end of the meeting that more work was needed to get the clarity that Greek people and markets would need to understand," Greek Finance Minister Euclid Tsakalotos said on his way out of the meeting.
Greece doesn’t have a large maturity deadline until July, when about €7 billion in obligations come due, but delaying the resolution of the program review adds to months of uncertainty that have taken their toll on the Greek economy—which has slipped back into recession—and kept the country from returning to the bond market.
The IMF and Germany disagreed over Greece’s economic outlook and the amount of debt relief required to assure economic stability, according to two European Union officials with knowledge of the talks, who asked not to be identified because the discussion was private.
A key issue of contention is the forecast for Greece’s economy after 2018, when the current bailout expires. The IMF has raised doubts about Greece’s ability to maintain such an optimistic budget performance for decades, while key creditors have been pushing for a more positive outlook. Less ambitious fiscal targets would increase the amount of debt relief needed.
Dijsselbloem said the parties agreed on a target for Greece’s primary surplus, which excludes interest payments, of 3.5% of gross domestic product until 2022. For the years after that the country would comply with the EU’s fiscal rules, although he didn’t determine what level of surplus that would entail.
Additional debt relief is also necessary for the European Central Bank to include Greek bonds in its asset purchases program, which would ease the country’s access to bond markets. Last week, Greek lawmakers approved economic measures in the hopes of mollifying creditors, including pension cuts, tax hikes and other structural economic reforms.
“The Greek authorities are taking their responsibilities and I think the partners of Greece are also taking their own responsibilities," European Union Economic and Monetary Affairs Commissioner Pierre Moscovici said. “There’s been a shared effort to narrow the gap between positions— we haven’t yet concluded but I hope under the guidance of the president of the Eurogroup it will possible three weeks from now."
Euro-area finance ministers committed last May to a set of potential measures to ease the repayment terms on Greek bailout loans after the end of the program in 2018, but the degree to which these measures will be implemented is still a subject of contention.
Among the options listed is the extension of maturities on euro-area loans to Greece, as well as the capping and deferral of interest payments. The IMF has said it wants these options to be specified further, so that numbers “add up" and annual Greek debt refinancing needs are kept below clearly defined thresholds. Bloomberg