Euro zone finance ministers gather in Brussels today for a key meeting on Greece, amid continuing tensions between the International Monetary Fund and the country’s European lenders on the question of debt relief. Minister for Finance Michael Noonan will join finance ministers from across the 19-member euro area for a crunch meeting, as the IMF upped the ante on the eve of the eurogroup by reiterating its call for debt relief for Greece.
In a debt sustainability analysis released on Monday, the IMF once again disputed the European Commission’s growth forecasts for Greece, arguing its own prediction of a surplus of 1.5 per cent of gross domestic product in the long run was more “plausible”. The commission has argued Greece will reach a primary surplus of 3.5 per cent of 2018, therefore reducing the need for debt relief.
Deferring payments
Among the debt relief measures suggested in the IMF report is a “substantial reprofiling” of the European portion of the loans to Greece, while it also suggested deferring payments until 2040.
Officials declined to comment on reports that Greece’s European lenders, who hold the vast majority of Greek debt, could “buy out” the IMF’s outstanding €14 billion in Greek debt.
Tensions between the IMF and Greece’s European lenders have plagued the third Greek bailout, with the IMF pushing for greater debt relief measures than euro zone finance ministers are willing to grant.
Despite signs of a contentious discussion on debt relief looming, markets rallied at the prospect ministers may give their backing to the disbursement of up to €11 billion for Greece, as the country moves closer to completing the first review of its third bailout after months of delay.
Contingency
plans On Sunday evening, the Greek parliament passed a fresh raft of measures, including
contingency plans which would be enacted if deficit targets are missed, which the government of Alexis Tsipras hopes will unlock a fresh round of funds.
This could cover the country's financing costs until November, including the repayment of €2.3 billion to the European Central Bank due in July.
Greek bond yields fell to a six-month low yesterday at the prospect of fresh funds being disbursed to Greece, while the Greek bourse outperformed weaker European stock markets yesterday.
Welcoming the adoption of the new measures by the Greek parliament, which include further increases in taxation, new legislation on a privatisation fund demanded by creditors and progress on preparing the sale of non-performing loans in the banking sector, EU commissioner Pierre Moscovici said in Paris a “key step” had been taken towards the conclusion of the first stage of the Greek programme.
