EU

#Eurozone holds back new loans to Greece, starts work on debt relief

Published

8 years ago

January 24, 2018

Eurozone finance ministers welcomed Greek progress in delivering reforms but have said they would only disburse the next tranche of loans once all agreed actions are complete, write Jan Strupczewski in Brussels and Renee Maltezou in Athens.

While Athens may have to wait until February for the money from the eurozone bailout fund ESM, the ministers said they would start technical work on more debt relief for Greece that could be granted after the end of the bailout in August.

To pay out new loans, international lenders have asked Greece first to adopt 110 “prior actions”.

To meet that condition, Greece’s parliament passed a so-called omnibus bill last week. Lenders’ experts said, however, that so far only 92 of the agreed steps were implemented.

“The Eurogroup welcomes the implementation of almost all of the agreed prior actions,” the statement said. “The Eurogroup calls on the Greek authorities to complete the outstanding prior actions as a matter of urgency,” it said.

“Following the full implementation of the prior actions and subject to the completion of national procedures, the ESM governing bodies are expected to ... approve the disbursement of the fourth tranche,” the ministers’ statement said.

The new loans, worth €6.7 billion, would be disbursed in two tranches, starting in February with €5.7bn for debt servicing needs. A further €1bn could be paid out in April, ESM head Klaus Regling told a news conference.

Greek Finance Minister Euclid Tsakalotos told reporters after the meeting Greece was pleased with the result because the last stage of the bailout did not foresee as many prior actions as the one just completed and talks could start on debt relief.

The technical work will be done by junior finance ministers and treasury officials from euro zone countries - the Eurogroup Working Group (EWG) - in a bid to link the size of potential debt relief to Greece’s economic performance over time.

“The Eurogroup confirms the start of the technical work by the EWG on the growth-adjustment mechanism, as part of the medium-term debt relief measures to be implemented, if needed, following the successful conclusion of the programme,” the statement said.

Such a growth-linked mechanism could help bridge the gap between some euro zone countries like Germany, which believe Greece may not need any further debt relief, and the International Monetary Fund, which insists on substantial debt relief for Athens now, if it is to take part in the bailout.

One of the main reasons why the IMF and Germany are at odds over the need for debt relief is different growth forecasts for Greece over the next 40 years.

The eurozone is more optimistic about growth in Greece than the IMF and even small differences in forecasts, accrued over such a long period, produce starkly different effect on debt projections.

Eurozone ministers called in the statement on the various institutions involved to converge in their views in order to produce a reliable debt sustainability analysis (DSA).

“The Eurogroup invites the European institutions and the IMF to take into account the holistic Greek growth strategy when updating the DSA,” the statement said.

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