Debt lightening conditional on reform implementation

The decision to lighten Greece’s debt at this week’s Eurogroup meeting will be conditional on the implementation of terms that the country’s creditors will set out, according to the second draft report of the European Commission.

The paper was drafted a day after the Eurogroup meeting on Monday and while it does not change the fiscal targets listed in the first draft of November 11 or the forecast regarding the course of the Greek economy, it does incorporate the decision for the disbursement of the next tranches.

The draft report makes clear that unless the agreed reforms are implemented, the economy’s rebound will be postponed until after 2014. It further expresses the Commission’s worries about the political balance in Greece that could lead to the failure of the streamlining program.

The main addition to the first draft is the explanation of the interventions for the reduction of the country’s debt. The report stresses that that they will take place gradually and under the condition that planned reforms will take place for the whole of the program’s duration, through 2016, as well as for the years to follow. The details of the conditions will be set out by the representatives of the Commission, the European Central Bank and the International Monetary Fund, known as the troika, which will also determine whether the program is actually being implemented.

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