Published: Tue, May 23, 2017
Economy | By Melissa Porter

Euro zone, International Monetary Fund to seek compromise on Greek debt deal

Merkel's Finance Minister Wolfgang Schauble (CDU), however, has always been a proponent of Greek austerity, refusing to release more loans to Greece without the intervention of the International Monetary Fund (IMF) which is not part of the third bailout.

Lenders have agreed in principle to restructuring but European Union countries led by Germany remain reluctant to agree to the substantial debt reduction backed by the International Monetary Fund....

The stumbling block will be on the issue of debt, where institutions like EC, ECB, European Stability Mechanism, IMF and countries differ as to whether the medium and long term relief measures already planned since 2016 are sufficient or if they should be further expanded to provide guarantees on the viability of Greek debt in the future.

German Finance Minister Wolfgang Schaeuble said he hoped for a political agreement on Monday that would allow euro zone governments to pay out the next tranche of loans to Greece.

Under the terms of the Greek bailout program, the country has to enact a series of economic reforms in order to get the bailout cash.

The IMF believes that debt relief, or at least a clear promise of it now, is clearly needed and is important to restore investor confidence in Greece, especially if the country, which has public debt of nearly twice the size of its GDP, is to return to market financing.

"I expect and I am working on a deal today", said the Eurogroup president Jeroen Dijsselbloem in Brussels, before another critical meeting for Greece was to start. He said that "extra measures if required" would come after the bailout program expires next year.

Greece needs new credit to repay some €7.3bn euros worth of maturing loans in July. As well as disagreeing on the scale of debt relief Greece requires, the International Monetary Fund and the eurozone have diverged on their growth projections for Greece.

Newly elected French President Emmanuel Macron said he backed debt relief for Greece in a phone call with Greek Prime Minister Alexis Tsipras.

The meeting will be the first for French Finance Minister Bruno Le Maire, named to his post last week by Macron, a pro-EU centrist.

Greece's finance minister, Euclid Tsakalotos, said: "Greece has done its bit, most would say more than its bit".

The Greek government is hoping to secure a deal as soon as possible so it can lift the uncertainty which has been hanging around the Greek economy over recent months.

Analysts said the main reason why Greece has taken a step back is its stalled bailout negotiations.

While the austerity measures have seen Greece's public finances improve, the draconian spending cuts have seen poverty rates surge to more than 35%.

Like this: