Monday 18 / November / 2024
Washington: There will be no breakthrough on unlocking new loans for Greece in Washington this week, but euro zone ministers will seek a deal next week in Amsterdam that could pave the way for debt relief talks, a top euro zone official said on Thursday.
"In Amsterdam we will have more time, everyone around the table and try to really get somewhere," the chairman of euro zone finance ministers, Jeroen Dijsselbloem, told reporters on the sidelines of International Monetary Fund and World Bank meetings in Washington.
He said euro zone lenders were adamant that the key to a deal was sticking to the assumption that Greece's government had to reach a 3.5 per cent of GDP primary surplus in 2018.
"I don't see any flexibility on the 3.5 per cent in 2018 because it was one of the anchors of the agreement of last summer. So that's going to take a huge effort on the part of Greece but I think it can be done," Dijsselbloem said.
The IMF, one of the lenders to Greece, believes that asking Athens to maintain a surplus of that size for decades after 2018 — an assumption of the euro zone programme — is unrealistic.
The Fund believes the target for the surplus — the budget balance before debt servicing — should be lowered and that euro zone governments, who are Greece's main creditors, should offer the country deeper debt relief to compensate.
"I think the IMF is right, it (the surplus target) is courageous, so the question is how to deal with the uncertainty around that, what do we do 'if'," Dijsselbloem said.
He noted that no-one knew exactly how quickly Greece's economy would grow in the coming years and what its rate of inflation would be, yet those indicators were crucial to assess the ability to repay loans.
Political decision needed
He said euro zone lenders and the IMF would eventually align their views on where Greece stood now, what fiscal effects would materialise from reforms that Greece was implementing and what the most likely scenario was for the future.
"We will try to close these differences and baseline assessments and then we will go to the political level, because in the end it is up to the ministers to decide if Greece has done enough," Dijsselbloem said.
"There is no point in disagreeing on something that is by definition uncertain. The question is how to deal with it if it creates problems for debt servicing. And that is something we can negotiate," he said.
"So we need a political debate on how we are going to manage that uncertainty," Dijsselbloem said.
He said there was a sense of urgency among the lenders and Greece alike because Athens needed new loans to repay 3.5 billion euros ($3.94 billion) in maturing debt in July and to regain the confidence of investors.
Euro zone countries, which are dealing with a migration crisis and the risk that Britain could vote to leave the European Union in a June referendum, want the Greek issue solved quickly.
Dijsselbloem said the current approach of euro zone governments and the IMF to Greek debt relief was to cap Greek debt servicing costs at 15 per cent of GDP annually and offer support to Athens if the costs rose above that ceiling.
"As long as the annual debt service is below 15 per cent, Greece should be able to manage it on its own. If it goes above that, we stand ready to do more to support them," he said.
That approach includes changes in Greek economic growth rates and the resulting change in the country's ability to pay, said Dijsselbloem. While ruling out debt haircuts or write-offs, he said the euro zone is willing to extend maturities, grace periods and lower interest rates to cut Greece's annual debt servicing burden.
The IMF wants euro zone lenders to offer clear steps to make Greek debt sustainable, making its own financial participation in the latest, third bailout for Greece conditional on that.
While the euro zone could put up all the needed money itself, Germany, Finland, Austria and other countries want the IMF to be financially involved to make the bailout terms more credible and less susceptible to European politics.
