• Moscovici says IMF, EU have converged on review requirements
  • Greece shouldn't be in stress situation forever, Sapin Says

Greece’s debt relief prospects have run into German resistance now that creditors are returning to Athens to finish the bailout review that will pave the way for talks on repayment terms.

A day after finance ministers held out negotiations as an incentive for Prime Minister Alexis Tsipras to meet the current round of financial rescue requirements, Germany’s Wolfgang Schaeuble said he didn’t see any case for imminent action. Speaking to reporters Tuesday, he said Greece’s servicing costs are too low to justify easing borrowing terms now.

“I have no real argument for the German legislature and the German public, for which I have a budgetary responsibility, that we should make this the focus of the debate now as it doesn’t play a role until 2025,” Schaeuble said in Brussels. He said the focus should be on Greece’s rescue conditions, to avoid the temptation of letting the government in Athens say “now we have debt relief, now we do nothing.”

All-Time High

French Finance Minister Michel Sapin countered that support for taking action is at an all-time high, particularly once Greece completes its first review of the current international bailout plan and resumes talks with the International Monetary Fund.

“I’ve never seen it so agreed that the question of the debt has to be dealt with,” Sapin told reporters Tuesday. “The question of the debt is now on the table so that we don’t keep them in a situation of stress forever.”  

Greece won an 86 billion-euro ($95 billion) bailout last year, its third rescue, after Tsipras and creditors pulled back from the brink of seeking an exit from the 19-nation currency bloc. The deal resurrected the idea of debt relief, which the euro area had dangled since 2012 without committing to formal action.

The IMF has been one of the strongest advocates for debt relief, while also taking the hardest line on fiscal measures needed to complete the review. In turn, Germany and other creditor nations have said Greece needs to secure a new IMF program as a condition of its euro-area aid.

EU-IMF Convergence

EU Economic Affairs Commissioner Pierre Moscovici said the IMF has converged with the Brussels-based commission on Greece’s requirements for meeting the review. He said Monday’s finance ministers’ meeting, in which the Washington-based IMF took part, set the stage for the bailout review to resume with “a common purpose” in getting a deal as quickly as possible.

“We got a current agenda of reforms,” including pension reform, implementation of a privatization and investment fund, and the creation of an independent revenue agency, Moscovici said in a Tuesday interview in Brussels. He said there is “progress being made in the reform process in Greece, and we want to go further in those discussions.”

Greek authorities pledged to make good on the current momentum. “We welcome the Eurogroup’s commitment to proceed with debt relief as soon as the review of the program is completed,” Tsipras said in a Twitter message Monday, when he was also in Brussels for separate EU leaders’ talks on how to ease the migration crisis that is also buffeting his nation.

Interest Rates

Moscovici said it’s too soon to discuss what kind of Greek debt reprofiling might be on the table, since talks won’t start until the review is done. In the past, negotiators behind the scenes have explored extending some of the outstanding rescue loans to 50-year terms, while lowering interest rates on others by 50 basis points.

France’s Sapin said the euro area has plenty of options that don’t run up against red lines in creditor nations, saying “we have to and can do it in such a way that there are no haircuts” to the principal of the bailout loans.

“That’s a red line for us. But we are used to these things,” Sapin said. “There’s a whole range of variables we can play on.”

Schaeuble countered that Greece’s cash flow outlook doesn’t justify easier terms anytime soon.

“Greece is financed for such a long time, Greece needn’t pay a cent of interest, nor a cent of redemptions,” Schaeuble said. “This part of the debate is a debate about prestige, but not substance.”

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