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Business

European Finance Ministers to Discuss Greek Debt Burden

That review would pave the way for the release of the next part of the loan, and open discussions on the thorny issue of whether to restructure Greece's debt

Greece's Prime Minister Alexis Tsipras addresses lawmakers during a parliamentary session in Athens, on Sunday, May 8, 2016, photo: AP/Yorgos Karahalis
1 year ago

European finance ministers are trying to break a deadlock over whether to provide Greece with the next batch of bailout loans, which it needs to avoid bankruptcy this year, and forgive some of its debts.

Arriving in Brussels to meet with his counterparts from the 19-country eurozone, French Finance Minister Michel Sapin said he was hoping for “the best” from the talks.

The so-called eurogroup meeting comes after Greece’s parliament approved Sunday a reform of the pension and tax systems. The reform, which would raise social security and pension contributions and hike taxes for many people, has run into fierce resistance from unions, which have launched repeated protests and walkouts — including a three-day general strike since Friday.

International creditors agreed last year to give Greece an 86 billion euro ($98 billion) package of rescue loans — Greece’s third bailout since 2010. A review of how effective Athens has been in making required austerity measures was supposed to have been completed six months ago.

That review would pave the way for the release of the next part of the loan, and open discussions on the thorny issue of whether to restructure Greece’s debt.

Greece's Prime Minister Alexis Tsipras addresses lawmakers during a parliamentary session in Athens, on Sunday, May 8, 2016. Greek anarchists hurled firebombs, chairs and wooden planks at riot police in brief clashes outside parliament while lawmakers were debating a controversial austerity bill, disrupting a much larger peaceful rally on Sunday. (AP Photo/Yorgos Karahalis)

Greece’s Prime Minister Alexis Tsipras addresses lawmakers during a parliamentary session in Athens, on Sunday, May 8, 2016. Photo: AP/Yorgos Karahalis

The impasse over the review is increasing pressure on Greek Prime Minister Alexis Tsipras, whose government has to make a 2.3 billion euro debt repayment in July.

Greece’s economy has been hammered by six years of budget cuts that were required by creditors to reduce the country’s public debt load. The country has needed bailout loans since it was locked out of international borrowing markets in 2010 amid investor worries about its public finances. About a quarter of the workforce is now unemployed.

Greek Labor Minister George Katrougalos has said the government would not accept “additional actions” to reduce government spending beyond what it agreed to last summer, when Athens abruptly abandoned its anti-bailout policies and signed up to the third bailout. It only did that after defaulting on its debt payments — which could happen again this summer without progress in the bailout negotiations — and to avoid a catastrophic exit from the 19-nation eurozone.

The International Monetary Fund (IMF) wants Greece to agree to the additional budget actions, which would be taken in case it misses its targets, but Greece and its other eurozone creditors are against that.

The IMF would also like the eurozone states to agree to write off some of the money Greece owes them. Many states, led by Germany, have so far rejected that notion, though they could look to help Greece by extending debt repayment dates and lowering interest rates further.

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