Greece has apparently received some encouragement for its reform push from Germany’s finance minister, who has raised hopes that the long due review of the current phase of the Greek bailout will be concluded soon and the lenders will release the 7 billion euro needed to pay back to themselves the debt installment due in July.
Wolfgang Schäuble, who recently repeated that Greece must implement unpopular economic reforms or leave the eurozone, appeared to soften his tone. In the light of the hard line approach against Britain that Germany has called for and the French presidential elections, Germany cannot afford talk of Grexit or any hint of discord among member states.
The next loan tranche will be needed for Greece’s debt repayments to the European lenders and if it is not advanced Greece will have to default, thus questioning once again “European values” and the sustainability of the Euro itself.
“If the Greek government keeps to all the agreements, the eurozone finance ministers could conclude the review on 22 May and soon after that release the next tranche,” Schäuble said in a newspaper interview on Friday.
The interviewers said Schäuble had praised Greece’s progress on reforms. He also said that thanks to a tough negotiating stance from Greece’s creditors, Athens had agreed to reform state pensions in order to fit the economic circumstances. “That is not easy, I know,” he said. “And it wants to improve the tax system so that revenues start rising again from 2020.”
Athens reached a preliminary agreement with its creditors – the European Commission, the European Central Bank and the International Monetary Fund (IMF) – earlier this month to reduce spending on pensions from 2019 and to collect more taxes from 2020.
Greece’s third bailout was agreed in August 2015 and the country is anxiously awaiting for a tranche of those funds to be released so that it can avoid a default on debt repayments. Loans of €7.5bn (£6.3bn), due to be repaid by Athens, mature in July.
Greece’s debts to the European institutions at the moment stand at 314.8 billion euro or 179% of the county’s GDP.
Despite pressure from Germany, the International Monetary Fund has so far declined to join other international lenders – the European Central Bank and the European Union – in funding Greece’s third bailout, worth an additional €86bn.
Berlin has said the IMF’s involvement is crucial if support for Greece is to continue.
The IMF has made repeated warnings that Greece’s debt burden is unsustainable. It has argued that refusing to write off some of the Greek debt burden will crush Greece’s economic prospects.
Schäuble’s new softer approach followed official figures in April showing that Greece managed to comfortably beat its creditors’ budget demands last year. In 2016 it posted a primary budget surplus – where government income exceeds expenditure once debt interest payments are excluded – mostly as a result of a higher tax take and cuts in public spending.
Source: Reuters
