Greece to get some cash – and some idea of future debt relief

Greece to get some cash – and some idea of future debt relief

Greece’s international lenders prepared on Thursday to unblock about 8.5 billion euros ($9.5 billion) in loans that Athens desperately needs next month to pay its bills, and to give some idea of what debt relief they may offer over the long-term.

The chairman of eurozone finance ministers Jeroen Dijsselbloem told reporters the size of the payment to Athens would be discussed during a meeting, since lenders agreed that Greece had pushed through all the requested reforms.

"I am confident that we will reach a deal about the payment of the next tranche today," German Finance Minister Wolfgang Schaeuble said on arrival at the ministers’ meeting on Greece in Luxembourg.

Officials who had prepared the talks had earlier discussed a loan of 7.4 to 8 billion euros, but after talks on Thursday morning agreed on a sum of 8.5 billion which they said would provide money for the maturing debt and an extra cash buffer.

The money would be paid in tranches, officials said, adding that Greece wanted an even bigger loan.

Dijsselbloem said the ministers, joined by International Monetary Fund Managing Director Christine Lagarde, would seek to meet Greek and IMF demands for clarity over debt relief.

Officials said the eurozone may tell the IMF it would consider extending the average weighted maturity of its loans to Greece by 15 years, from the current 30 years.

The clarity is needed because new loan disbursement hinges on a condition set by the German parliament that the IMF joins the Greek bailout, now shouldered only by the eurozone. The IMF is seen as giving economic legitimacy to the program.

But to join, the IMF wants not only Greece to complete reforms, but also the eurozone to give details on what debt relief it would offer Greece in 2018, when the bailout ends.

"Today we will give more clarity to Greece and to the IMF [on] how we will move forward, how we will calibrate debt relief needed next year," Dijsselbloem said.

"There won’t be a figure that rolls out… The figure will only come at the end of the program," he said.

Debt relief talk has been a hard sell in Germany, the biggest contributor to the Greek bailouts, which faces elections in September and does not want to anger its bailout-weary voters with discussions of relief for Athens.

Berlin also wants to retain leverage over Greece to make sure reforms remaining under the bailout are implemented.

Lagarde suggested last week that the Fund may join the bailout "in principle" on the strength of the reforms, but disburse its own money to Athens only when details of the 2018 debt relief are clear.

The IMF’s participation, even without immediate disbursements, would be enough for the German parliament to back new eurozone loans to Athens, thus ensuring Greece would get enough cash in July to repay maturing debt and avoid default.

The eurozone has been reluctant to commit to concrete debt relief numbers now because it argues that if Greece does all that is required of it and keeps a high primary surplus – the budget before debt servicing costs – for decades, it may not need any debt relief at all.

But the IMF says eurozone assumptions on Greek economic growth and the country’s ability to keep a high primary surplus are unrealistic and that Athens clearly needs debt relief to win back investor confidence and return to market financing.

"Hopefully differences will narrow enough so that it can help the process," Lagarde said on entering the talks. "We hope to have a good solution by the end of the meeting."

To bridge the wide differences in assumptions on Greek growth for the next decades, France is proposing to link the size of the debt relief with Greek economic growth.

"My proposal, the French proposal, is of course still on the table," French Finance Minister Bruno Le Maire said. "I think it is the right moment, I think it’s really time to find an agreement," he said.

Pressure is also mounting at home on Greek Prime Minister Alexis Tsipras from a public weary of austerity.

Greece says it has done its part after legislating further pension cuts and tax hikes demanded by lenders to convince the IMF to participate.

"Greece has fulfilled its commitments and adopted the required reforms. Now it is time for the Europeans to comply with their commitments on debt relief," Greek President Prokopis Pavlopoulos said in an interview with German daily Handelsblatt.

In Athens, some 1,500 pensioners gathered to protest against more than a dozen rounds of pension cuts since bailout-induced austerity was enforced seven years ago.

"We have been robbed blind," said Stavros Vassiliou, 65, "I worked 41 years in construction … I was taking 2,400 euros in 2011, now I take [a pension] of 1,000."

Greece’s economy has improved, but unemployment is still running at more than 23 percent, around 45 percent for youth. [Reuters]

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