LUXEMBOURG – Greece is trying Thursday to convince its creditors that it’s done enough to get its hands on more rescue money as well as a detailed plan for how its massive debt burden can be eased once its current bailout program ends next year.
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.
As a result, the main point of interest of Thursday’s meeting of eurozone finance ministers is on the debt relief discussions.
Under the terms of its 2015 bailout deal, Greece’s European creditors had promised to provide cash and find a way to lighten the country’s long-term debt load — as long as it kept a lid on spending and deeply reformed the economy.
The eurozone’s top official, Jeroen Dijsselbloem, sought to downplay expectations that the full-scale of the debt relief on offer will emerge Thursday.
“Today we will give more clarity to Greece,” he said as he joined the gathering in Luxembourg. “There won’t be a figure that rolls out of that. The figure will only come right at the end of the program.”
Dijsselbloem said he hoped the meeting will mark a “very positive step forward” that builds on “the huge effort that Greece has put in.” Greece’s creditors, he added, were “preparing Greece for the end of the program,” when Greece would have to finance itself for the first time since 2010 by borrowing money from international bond markets.
“It is a new phase,” he said.
Though the meeting won’t see any final decisions on the size of the debt relief, Dijsselbloem said discussions will center on what kind of measures will be offered.
Greek Prime Minister Alexis Tsipras has repeatedly said that debt relief is necessary to get the Greek economy back on track and has indicated that he would be prepared to request a summit of eurozone leaders if no debt relief deal is secured Thursday.
Despite years of austerity since Greece was first bailed out in 2010, the country’s debt burden still stands at about 320 billion euros ($360 billion), or around 180 percent of annual gross domestic product. That’s largely because the Greek economy has contracted by around a quarter, meaning a worsening in the debt load even at a time when the country’s budget has improved markedly.
An outright cut in Greece’s debt is not allowed under euro rules, but the length of time the country has in paying back its debts can be extended, and the interest rates on those debts can be cut. For Greece, that would limit the amount it has to pay out on debt servicing each year, money it can use for the benefit of the Greek economy and society.
Pierre Moscovici, the European Union’s top economy official said it’s time for the Greek people to see the “light at the end of the tunnel of austerity” and that this Eurogroup meeting could be “very positive for Greece and the Greek people.”
One of the reasons why Greece’s bailout program has stalled over the past few months has been a disagreement between the eurozone and the International Monetary Fund on debt relief. The IMF, which has contributed financially to Greece’s first two bailouts but not the third, has wanted more information about what debt relief Greece may get before it gets more involved in the current program.
Germany, for one, has been insistent on IMF participation and that’s held up the latest disbursement to Greece.
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.
Greece has been living under austerity for more than seven years and its left-led coalition government recently legislated further cost cuts, including to pensions, in hopes of getting the long-delayed loan installment. It needs the money to meet roughly 7 billion euros ($7.8 billion) in debt repayments in July.
The Greek government, whose popularity has fallen sharply as it imposed more austerity measures, faced more criticism Thursday when more than 2,000 elderly protesters marched through central Athens to demonstrate against pension cuts.
“We can’t live on 300 euros” they chanted, with some waving sticks.