ESM approves funding, Lagarde raises doubts about debt relief

ESM approves funding, Lagarde raises doubts about debt relief

The European Stability Mechanism approved the disbursement of 7.5 billion euros in bailout funds for Greece on Friday, ensuring that the country will meet debt repayments that come due next month, though the head of the International Monetary Fund, Christine Lagarde, poured cold water on Greek hopes for debt relief.

Approving the bailout funding Friday, the ESM said the money would go both toward servicing Greece’s debt and helping clear domestic arrears. The development was welcomed by Greek government officials.However, high spirits in Athens were dampened slightly by comments from Lagarde, during a visit to Austria late on Thursday, indicating that Greek debt relief is not on the agenda despite indications at a Eurogroup summit last month that it was. When asked about the May debt relief agreement by Kathimerini’s correspondent Eleni Varvitsiotis, Lagarde replied, “Which debt relief agreement are you talking about?” “It is difficult to comment on an agreement we were not signatory to at the time,” she said. “We do not have a program with Greece. The IMF is engaged and was very well represented at the May meeting during which lots of discussions took place,” she added. Lagarde repeated the IMF’s stance on debt relief. “We believe for us to be engaged under a program, a debt operation would have to be assessed on the basis of a new debt sustainability analysis that would be handled on the basis of reforms conducted, the general framework, and growth assumptions that will all be adequately measured later on.”

Prime Minister Alexis Tsipras and Finance Minister Euclid Tsakalotos have emphasized that the completion of the bailout review, and the approval of funds, pave the way for a period of recovery and growth in Greece. In a speech on Thursday, Tsipras underlined his government’s interest in attracting investment. But sources close to Tsipras have expressed concerns about the impact of other factors on Greece’s prospects, notably on the possibility of British citizens voting for their country to leave the European Union in a referendum next Thursday. In such a scenario any plans for foreign investment in Greece are likely to be frozen, sources indicated. International capital is likely to head for safer destinations, such as Germany, the same sources said.

In any case, Brexit would deal a blow to Greece’s incipient recovery. “If the European Union starts to unravel, the outcome is uncertain, with obvious risks for Greece, as it is not at all sure that certain circles who in the past had championed Grexit have revised their opinions,” one government source said.

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