Minister for Finance Michael Noonan has said he expects ministers to sign off on new funds for Greece at a key eurogroup meeting on Tuesday in Brussels, though a decision on debt relief could be pushed back amid continuing divisions between Greece’s lenders.
Arriving in Brussels, the Minister for Finance said that he expected an agreement on Greece at today’s meeting, subject to technical review in the next couple of weeks. “I think that Greece has put a lot of new measures through their parliament and I think that will be sufficient to meet the requirements of the group here in principle,” he said.
Debt
But the contentious issue of debt relief is likely to dominate discussions amid continuing divisions between the IMF and Greece’s European lenders on the scale of debt relief needed by Greece.
The IMF upped the ante on the eve of Tuesday’s eurogroup by reiterating its call for substantial 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 that its own prediction of a surplus of 1.5 per cent of GDP in the long run was more “plausible.”
The commission has consistently argued that Greece will reach a primary surplus of 3.5 per cent of 2018, therefore reducing the need for debt relief.
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 debt.
IMF
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. Arriving for Tuesday’s eurogroup meeting, German finance minister Wolfgang Schauble suggested that debt relief could be granted, but only after 2018 at the end of the programme.
Asked if Ireland would be prepared to back a Greek bailout without IMF involvement, Minister Noonan said that the IMF should be involved. “We believe the IMF should stay in. The IMF have been an integral part of all programmes up to now.”
Eurogroup chairman Jeroen Dijsselbloem also told reporters that continuing the programme without the IMF was “not an option” .
Despite signs of a contentious discussion on debt relief at Tuesday’s meeting, markets rallied on Monday at the prospect that ministers will 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 programme after months of delay.
Measures
On Sunday evening the Greek parliament passed a fresh raft of measures, including a package of contingency measures which would be enacted if deficit targets are missed, which the government of Alexis Tsipras hopes will unlock a fresh round of bailout funds.
This could cover the country’s financing costs until November, including the repayment of €2.3 billion to the European Central Bank (ECB) due in July. Greek bond yields fell to a six-month low on Monday at the prospect of fresh funds being disbursed to Greece, while the Greek bourse outperformed weaker European stock markets on Monday.
The imminent completion of the first review of the third Greek bailout programme comes more than seven months after the review had initially expected to be completed and follows months of negotiations between Greek officials and creditors in Athens.
Greece entered its third bailout programme in five years last summer following the election of a Syriza-led government last January.
Despite the pledge by Syriza’s leader Alexis Tsipras to reject further austerity, the Greek Prime Minister Alexis Tsipras signed up to the €86 billion bailout programme last August, but has argued that debt relief is vital if the country is to survive economically.
