European finance ministers cut Greece’s interest rates and gave it more time to pay back rescue loans while dismissing for now calls for debt relief that may be needed to keep the country afloat over the longer term.
In the fourth Greek crisis meeting in two weeks, the ministers persuaded a skeptical International Monetary Fund that Europe has a formula for putting the country that triggered the debt crisis onto a path back out of it. Greece was also cleared to receive a 34.4 billion-euro loan installment in December.
“All initiatives decided upon today will bring Greece’s public debt clearly back on a sustainable path,” Luxembourg Prime Minister Jean-Claude Juncker told reporters after chairing a 13-hour meeting that ended early today. “This has been a very difficult deal.”
After three years of false starts, the creditor governments led by Germany proclaimed the latest fix for Greece just as they grapple with swelling financing needs in Cyprus and a potential aid request by Spain, the fourth-largest euro economy.
“We didn’t discuss a debt cut,” said German Finance Minister Wolfgang Schaeuble. The agreement reached “on the one hand, tries with a debt buyback to significantly cut the overall debt burden by 2020. On the other hand we closed the financing gap and the measures for the financing of the debt buyback through temporary measures.”
Finland, another creditor nation whose tolerance of the cost of supporting Greece has tested its electorate, also backed today’s accord, according to Finance Minister Jutta Urpilainen.
“Finland’s conditions were fulfilled,” she said. “New loans won’t be granted to Greece.”
The batch of measures will help pare Greece’s debt from 190 percent of gross domestic product in 2014 to 124 percent of GDP in 2020, a target set by the IMF as its condition for continuing to fund the Greek program. One IMF concession was to raise that target from 120 percent.
The accord then envisages the debt ratio falling further, to “substantially lower than” 110 percent two years later.
“This is not just about money,” Juncker said. “It is the promise of a new future for the Greek people as a whole.”
The gathering began at lunchtime yesterday and ended in the early hours of the next morning.
It was “a long meeting, which was conducted in good spirit,” Urpilainen said.