Ahead of a meeting of eurozone finance minister, the head of the group, Jeroen Dijsselbloem has said Greece’s latest bailout package would need the participation of the International Monetary Fund (IMF).
Jeroen Dijsselbloem told journalists in Brussels on Tuesday that it wasn’t an option to continue funding debt-laden Greece without the International Monetary Fund (IMF).
The Eurogroup chief was speaking before a meeting of eurozone finance ministers – also known as Eurogroup – Tuesday evening, which is set to discuss the third bailout program within five years for Greece, totaling 86 billion euros ($96 billion).
The ministers were expected to review Athens’ progress in implementing further austerity measures, and, more importantly, end a row between some eurozone members and the IMF about the possibility of further debt relief for Greece.
“There is a reason to look at debt relief because the debt is very high and there will be some problems in the future,” Dijsselbloem said. “How big these problems are and how we can deal with them and when we can deal with them, that’s today’s topic.”
Prior to the meeting, Slovakian finance minister Peter Kazimir warned the meeting “is not going to be an easy one,” and added that the ministers would probably have to “spend the night together.”
Crucial debt relief
Central to the talks in Brussels is the question of how effective fresh funding for Greece can be in view of the country’s still growing mountain of debt and given its ongoing economic crisis.
The IMF believes that Greek public debt at the current level of about 180 percent of gross domestic product (GDP) is unsustainable and must be reduced. The IMF warned that without restructuring, the debt load could soar to as much as 250 percent of GDP by 2060.
“Providing an upfront unconditional component to debt relief is critical to provide a strong and credible signal to markets about the commitment of official creditors to ensuring debt sustainability,” the lender of last resort said in its Debt Sustainability Analysis released on Monday.
The IMF said in the short-term this could be achieved by offering longer loan periods and fixed interest rates on new loans to Greece. It also called for most of Greece’s existing debt to be re-financed to a fixed interest rate of 1.5 percent until 2040.
German finance minister Wolfgang Schäuble, however, is deeply opposed to alleviating any of Athens’ debt and claims it is not necessary for now. Fortunately for Athens, Germany also wants the IMF to remain in the bailout and will have to cede ground to the fund on debt relief to achieve that.
The ministers will also decide whether to conclude the first review of Greece’s third bailout, necessary to unlock about 11 billion euros in desperately needed loans.
Greece urgently needs the next tranche of bailout money to repay big loans to the European Central Bank (ECB) and IMF in July, and has already fallen behind in paying for everyday government duties and public sector wages.
The review comes two days after Greek lawmakers narrowly adopted another batch of controversial reform commitments, including spending cuts and tax hikes as well as a gurantee of further measures in case of budget overruns in the next few years.
uhe/jd (Reuters, AFP, dpa)