#Eurozone to unlock new loans to #Greece, working on debt relief

Greece’s economy expanded by 1.6% last year after emerging from a long recession. The European Commission forecast growth of 2.5 percent this year and next, but that rate could slow if reforms stall after strict monitoring by the lenders ceases.

The euro zone bailout fund is expected to pay out a €5.7bn euro loan later in March, Eurogroup head Mario Centeno told a news conference following the finance ministers’ monthly meeting, after Greece met commitments under the third review of its rescue programme.

To successfully exit the programme, a fourth review of 88 reform actions must be completed before August. This would allow Greece to access other loans.

“I am confident Greece will implement all remaining deliverables to conclude the programme successfully,” Centeno said.

They include new privatizations and reform of the gas and electricity markets, which he said were preconditions to granting Greece new debt relief.

DEBT RELIEF

Technical talks are already ongoing on one of the possible measures that would grant Greece additional debt relief after it benefited from extensions of its debt maturities and other short-term aid in past years.

Centeno said that work was under way on linking future eurozone debt relief to the rate of Greek economic growth, with the objective of granting support if growth slowed.

Other more substantial measures will be discussed at the next meeting of finance ministers next month, Centeno said.

Among possible measures are the use of funds that will remain unused after the bailout programme ends on August 20.

This could be as mush as €27bn, and could be used to buy out Greek debt falling due in the next five years and replace it with cheaper and longer-term loans from the eurozone bailout fund, the European Stability Mechanism (ESM).

Another option could involve the return of profits made by the European Central Bank on Greek bonds.

Both measures would come with conditions attached, mostly linked to the implementation of reforms already approved but that would take years to fully execute.

Alternatives could entail enhanced supervision by EU institutions over Greek reforms after the bailout ends.

Without a financial safety net Greece could face market pressure that would increase debt servicing costs.

Greece is also building a cash buffer, which could reach €20bn, to bolster a full return to debt markets and support sustainable growth.