Reuters – Greece will probably not need a precautionary credit line after its bailout ends in August if the country sticks to reforms, the head of Europe’s rescue fund said in an interview released on Saturday.
Greece regained market access last year but some European Union policymakers and Greek central banker believe Athens cannot go it alone without a standby line of credit after its financial support ends.
But a precautionary credit line would come with conditions attached, something the government is keen to avoid after eight years of enforced austerity.
The head of the European Stability Mechanism (ESM), Klaus Regling, said having a precautionary arrangement available gives more assurances to markets, investors and the Greek population.
The ESM and the European Financial Stability Facility are Greece’s largest creditors, together holding more than half of its 332 billion euro public debt, a sum equal to nearly 180 percent of economic output.
They have promised Greece short, medium and longer term debt relief measures. The ESM offered the first set last year, effectively lowering the risk that a rise in interest rates would mean higher debt servicing costs for Greece in the future.
In the coming months, euro zone finance ministers will look into whether Greece needs more relief to make sure that its debt load is sustainable.
Regling said the decision on the medium-term relief will be taken before August and could possibly include the ESM buying out IMF’s loans which are more expensive.
“If there’s additional debt relief, there might be some additional surveillance, some kind of tighter surveillance”, he added.
The International Monetary Fund, which participated financially in Greece’s first and second bailout programmes, says debt relief is necessary for the country to emerge from crisis.
To accommodate the IMF and convince it to participate in the third bailout, euro zone governments said last year that in 2018 they would consider further extending the maturities and grace periods of their loans to Greece by up to 15 years. The average maturity now is 30 years.
Asked whether the IMF would come on board and agree on a common debt sustainability analysis for Greece with the ESM, Regling said: “I hope so, we are working hard on that.”