Reuters – Euro zone lenders will put together a debt relief deal for Greece that will be credible to markets and involve a rescheduling of loans from the second Greek bailout, said the president of the eurogroup Mario Centeno on Saturday morning
“We continue to work with the IMF, there are meetings scheduled on our way to June 21st and everyone must be reassured that the decision (on debt relief) will provide Greece with market access … from the 20th of August,” said Centeno.
The IMF took part in the first two bailouts but refused to join in the third until the eurozone agrees on debt relief measures that can make the 179 percent of GDP bebt appear sustainable.
Many euro zone policymakers see the IMF’s stamp of approval on the debt relief offer as key for its credibility with financial markets.
Eurogroup president said “I think people will be able to read the final package that will be agreed upon and the IMF is going to be involved in the future no matter what because of the huge financial engagement that the IMF has in Greece already”
He said the euro zone planned to consider only the 131 billion euros of loans from the second bailout for maturity reprofiling.
“We continue to work within the agreed lines. This means vis-à-vis the EFSF loans that the extension can be up to 15 years. This is what is being discussed. Along with other debt measures that will be also considered now,” he said, referring to the European Financial Stability Facility.
Other measures include replacing more expensive IMF loans to Greece with cheaper euro zone ones, returning profits made by euro zone central banks on Greek bonds to Athens and linking the pace of debt repayments to the rate of Greek economic growth.
The IMF wants the EFSF loan maturity and grace period extension to be the maximum 15 years. It also wants it to be automatically prolonged for an indefinite period, if needed to ensure Greek gross financing needs stay below 20 percent of GDP.
Germany and several other northern European countries would like shorter extensions and no automatic prolongation, but instead quarterly reviews to make sure Greece is not reversing reforms agreed and implemented under the three bailouts.
To make sure that Greece sticks to reforms, the euro zone wants to insert a clause into the debt agreement that it would become null and void unless Greece keeps its primary surplus at 3.5 percent of GDP until at least 2022.