Euro zone, IMF to seek deal on Greek debt

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BRUSSELS: Euro zone finance ministers and the International Monetary Fund will seek a deal on Greek debt relief that balances the IMF’s demand for a clear ‘when and how’ with Germany’s preference for ‘only if necessary’ and ‘details later’.

Without the deal, no new loans can be disbursed to Athens, even though the bailout is now handled only by euro zone governments, and Greece needs new credit to repay some 7.3 billion euros worth of maturing loans in July.

Without the loans, Athens is likely to default – a bad start for a country that wants to return to market financing next year when its latest bailout, the third since 2010, ends in mid-2018.

For its part, Greece has done what it could to secure a deal. It has agreed, albeit after months of negotiations, with the euro zone lenders and the IMF on pensions and tax reforms.

Euro zone officials say a report prepared by experts on whether Greece has implemented what is called ‘prior actions’ – laws that have to be passed to make the reforms stick – is positive.

That means only a deal on debt relief between the IMF and the euro zone now stands between Athens and new loans.

But an agreement is far from simple.

“The chances of a deal are 50-50. We have done pretty good preparations, I can express a hope there will be an agreement, but it is an assumption, not a forecast,” a senior EU official involved with the preparations said.

A group of north European countries led by Germany wants the IMF to join for credibility reasons, believing the European Commission’s approach towards Athens can be too lenient.

The same countries, however, oppose a firm commitment of debt relief for Greece, fearing the disapproval of bailout-weary voters at home. They are also concerned that once Athens gets a debt deal, it would lose the incentive to continue reforms.

The discussion therefore focuses on how to make a euro zone statement on Greek debt relief from a year ago, more detailed and more concrete.

“The IMF wants maximum (debt relief) commitment upfront, while others would prefer to be more precise only in 2018,” a senior euro zone official said, referring to the end of the third bailout in mid-2018, by which time lenders would have a full view of Greek reform completion and the latest economic data.

If there is a debt deal, Athens has tentative plans for a return to bond markets as early as July. — Reuters