- Finance ministers discussing how to bridge gap with IMF
- Group moving closer to approving payout of next rescue loan
Euro-area finance ministers signaled a willingness to compromise with the International Monetary Fund’s hard line on Greek debt relief as they prepare to work out conditions for easing the nation’s 321 billion euros ($358 billion) of loans.
"It’s important for many countries in the Eurogroup to have the IMF on board,” Jeroen Dijsselbloem, the Dutch Finance Minister who chairs the group of his 18 euro-area counterparts, said before the meeting in Brussels on Tuesday. “We will have to make concessions to the IMF in order to reduce the debt issue -- how and when will be discussed today."
With the IMF projecting the country’s debt to reach 174 percent of gross domestic product by 2020, the Washington-based fund insists that more restructuring is required to make the nation’s finances sustainable. The euro area has balked, resisting the fund’s demand that debt relief be nailed down before Greece’s bailout program ends in 2018 and opposing the IMF’s more drastic proposals over extending loan maturities, lowering interest rates and deferring repayments.
The IMF has said it wants to lengthen the maturity on some of Greece’s loans by as much as 30 years, extend the grace periods on debt-payment deferrals by as much as 20 years and fix interest rates at 1.5 percent or lower. The euro area has suggested extending the average maturity of the loans by five years, pegging repayments at 1 percent of GDP until 2050 and capping interest rates at 2 percent, with the excess being deferred until 2050.
“We have no dispute with the IMF, we’re trying to reach a common understanding of what Greece can do,” German Finance Minister Wolfgang Schaeuble said. “Without the IMF being on board there will be no program.”
While differences with the IMF linger, the euro area has signaled it’s close to approving the payout of the debt-ravaged nation’s next bailout installment of around 11 billion euros, which is needed before 2.3 billion euros of Greek bonds held by the European Central Bank come due in July. Euro-area finance chiefs have previously indicated that an agreement on debt relief is needed before they can approve the next payout.
“We hope that we’ll be able to really reach agreement in principle,” European Commission Vice President Valdis Dombrovskis said as the meeting got under way. An agreement would be “subject to fulfillment of certain conditions that would allow for disbursement of the next tranche within the Greek program,” he said.