Xinhua — The Eurogroup on Monday endorsed short-term debt relieving measures for Greece proposed by the European Stability Mechanism (ESM) which will have “a significant positive impact” on the sustainability of Greek debt.
These measures are expected to reduce of Greek public debt by 21.8% as a percentage of GDP in 2060, but the size of the reduction will ultimately depend largely on market conditions.
Eurogroup President Jeroen Dijsselbloem said they are also ready to use medium-term measures when necessary at the end of the program or the second half of 2018 such as a possible reduction of the very high primary surplus targets for 2018 and beyond.
ESM chief Klaus Regling said that the short-term debt measures will begin to be implemented in the coming weeks.
The measures were not enough to satisfy the demands of the IMF, which has demanded substantial debt relief or harsher austerity procedures in order to join the Greek program.
IMF staff reconfirmed Monday its intention to recommend to the Fund’s executive board a new financing arrangement for Greece as soon as possible once staff-level agreement is reached.
“It was clear that more work has to be done. The institutions are prepared and stand ready to return to Athens to work on it,” said Dijsselbloem.
The Eurogroup noted that staff-level agreement should include measures to reach the agreed fiscal target for 2018 (a primary balance of 3.5 percent of GDP), as well as reforms to enhance growth, including further substantial reforms of the labour market.
Greek Finance Minister Euclid Tsakalotos expressed satisfaction and described the deal as “progress,” but he warned international creditors, including the IMF, not to pressure Athens to implement measures it had not previously agreed to.
The agreed short term measures to reduce Greek debt, consist of
1 – an extension of the loan repayment period to 32.5 years from 28.3 years and “locking” of interest for certain loans to protect Greece from future interest rate increases.
2 – an exchange of bonds with a floating interest held by Greek banks (as part of their recapitalization) with fixed rate bonds and
3 – the use of interest rates exchanges (swaps) to stabilize Greece’s payments for certain ESM loans. and the lifting of an interest burden that Greece would be paying in 2017 in some of its loans, associated with old privatisation goals.
They also include the granting of certain future funding in Greece with fixed rates
These measures will be implemented from now until the end of the Greek program in mid-2018.
