Greek Need for Debt Relief Eases Amid Lower Rates, Estonia Says

  • Longer loan terms mean Greece already got some reprofiling
  • Financial-sector milestones needed for more aid, Ross says

Greece’s need for debt relief has receded as conditions have stabilized and interest rates have come down, a senior Estonian finance ministry official said.

“Financially, the state of things is less acute,” said Marten Ross, the ministry’s deputy secretary general for financial policy and external relations. “The debt issue of course is most acute whenever someone needs money, so it is a bit calmer.”

Bank recapitalization, an improving market outlook and previous bailout loan extensions have all contributed to a better forecast for Greece in recent months, Ross said in a Nov. 25 interview in Tallinn, Estonia. The 86 billion-euro ($91 billion) bailout signed in August had set aside 25 billion euros for banking needs, more than three times what’s currently required, and Greece may even be able to tap financial markets next year, he said.

The yield on Greece’s 10-year benchmark bond was 7.3 percent on Friday, according to data compiled by Bloomberg. That’s down from 19.6 percent in July.

“A big question is the fate of pension reform, Greeks should get that settled soon, plus of course, next year’s budget,” Ross said.

Prime Minister Alexis Tsipras is trying to keep his nation’s rescue on track while also preserving his government. After a tough vote on bailout-required measures, his parliamentary majority eroded to three seats, after two lawmakers previously aligned with the government refused to back the bill.

Tsipras has asked Greece’s president to convene a meeting of political party leaders to discuss pension reform, as creditors demand additional cuts on benefits for retirees. The prime minister’s office said in a statement on Friday that the 41-year-old leader doesn’t see consensus on required reforms as a prerequisite for the meeting, and his aim is to lay the groundwork for “a structured national dialogue”. The purpose of the meeting, which may take place over the weekend, is to register views and “synthesize them, if this proves feasible,” according to the statement.

Greece now has until mid-December to meet a new list of milestones in order to unlock 1 billion euros in bailout money. The country also is under pressure to clarify how it will set up a privatization fund that is intended to sell state assets and raise revenue to pay back aid loans and possibly make room for investment-boosting spending.

Ross said Greece will need to continue making progress meeting its financial-sector requirements. The first overall program review, initially set for mid-November, is now behind schedule by several months, and will need to wrap up before the International Monetary Fund can rejoin the bailout effort fully.

“It’s not a big issue in the sense of getting finances, other than that this is partly tied to IMF getting back on board,” Ross said.

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