Greece’s Creditors Close to Compromising on DebtBy
Eurogroup president says debt discussions are in final mile
Greece’s creditors hold talks on the sidelines of IMF meetings
Greece’s creditors are getting closer on a deal to ease the country’s debt burden, according to Eurogroup President Mario Centeno.
Greece’s 86-billion euro ($106-billion) bailout program is set to run out in August, and creditors are working on finding a compromise on debt repayments that would help to manage the country’s financing needs after it stops receiving international aid. A debt deal would also allow the International Monetary Fund to participate in the current bailout.
“The positions today are much closer than they used to be before,” Centeno, who is Portugal’s finance minister and chairs the meetings of his euro-area counterparts, said in an interview in Washington. “We still have a final mile to go but there is a positive sentiment around the table so I think that reflects a true willingness to be part of the program.”
Further easing Greek debt is a key precondition for the Washington-based IMF before it can participate in the country’s program. While the IMF has co-financed Greece’s first two bailouts it hasn’t yet activated its third one, arguing the euro area must arrange for more debt sustainability. But the participation of the fund, even a few months before the end of the bailout, is important for some countries including Germany, who see the IMF coming on board as a seal of approval that will offer credibility to the bailout.
A “committed presence” by the IMF will also help with market confidence, Centeno said.
Talks among Greece’s creditors and euro-area countries on likely debt measures have been going on at a technical level for months. That includes a proposal to link debt repayments to economic growth, so the country can pay back more if it is doing well, and less if it isn’t. The aim is to have a final agreement in the early summer, but key differences among creditors on the scope and type of debt relief persist.
The IMF would like to see wide-scale debt relief on all of Greece’s euro-area loans --including those from other countries and the bloc’s bailout fund. That demand is facing resistance by many European creditors who are only willing to discuss easing the terms of some loans.
Other disagreements have to do with whether the debt relief will be granted to Greece unconditionally or whether it should be tied to budget discipline and further economic reforms. The differences were discussed at a meeting of officials from Greece’s key creditor countries and institutions on the sidelines of the IMF meetings in Washington this week.
In order for the IMF to have sufficient time to activate its bailout for Greece before it runs out in August, an agreement on all these parameters will likely need to be struck by the end of next month.
For Centeno, the key is that any conditions attached to debt relief come from Greece’s own plans for growth. “We all want debt conditionality to be embedded in the growth strategy for Greece,” he said, referring to the country’s plans for the economy in its post-bailout life.
“Ownership is the single word that may and should define the process in the coming months.”