Greece seeks bailout, debt breakthroughs

Marco Green
June 19, 2017

On Thursday, the IMF agreed to offer Athens a standby arrangement of less than $2 billion but won't be disbursing any of the funds until euro zone countries offer more detail on potential debt relief measures in 2018, Reuters reported.

"Today Greece is turning a page".

"We are really doing our best to find an agreement", said French Finance Minister Bruno Le Maire after talks on Monday with his Greek counterpart Euclid Tsakalotos. "With unity and determination we move forward [to achieve] fair growth and heal the wounds of the crisis", Tsipras said in a tweet after midnight.

German Finance Minister Wolfgang Schaeuble, who has been instrumental in the austerity demanded of Greece in return for money, largely from Berlin, said he was "optimistic" a deal on the disbursement will be clinched but was more guarded when it came to discussing debt relief.

AIP supports the IMF's long-held principle that any new program with Greece should be predicated on the "two legs" of policy reforms combined with debt relief.

But as part of the compromise with Greece, eurozone ministers agreed to provide debt relief when the current bailout program ends next year.

Jeroen Dijsselbloem, chair of the Eurogroup of euro zone finance ministers, has said he expects a "deal on the full completion of the second review" at the upcoming Eurogroup meeting in Luxembourg.

European creditors had promised some form of debt relief if Greece implemented austerity measures.

Debt relief talk has been a hard sell in Germany, the biggest contributor to the Greek bailouts, which faces elections in September and does not want to anger its bailout-weary voters with discussions of relief for Athens.

The Eurogroup says it should be able to proceed with the next tranche of loans to Greece, after Eurozone states complete national procedures authorising it. It needs the funds as it faces a roughly 7 billion euro spike in debt repayments in July which it will struggle to meet from its own resources.

Some euro zone scenarios show that with sufficiently high economic growth and budgetary discipline - a primary surplus above 3 percent of GDP for 20 years - Greece would not even need any debt relief.

Further breaking down the tranche that is to be disbursed as soon as national parliaments complete their procedures and the International Monetary Fund board givers the Green light, a €7.7 billion July package will cover debt servicing with €6.9 billion and the €0.8 billion for arrears clearance to be used during the first months following July's disbursement.

Given that the Greek government has delivered on a wide array of economic reforms that were required for the payout of the next installment of rescue loans, there appears to be little doubt that the country will be cleared to get its next batch of bailout funds.

"We can't live on 300 euros ($334)!" they chanted, with some waving sticks.

As a consolation, in a compromise negotiated by France, Greece won a certain amount of clarity from the eurozone on debt relief, including an agreement to link debt repayments to Greek growth.

Other reports by Click Lancashire

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