A meeting of finance ministers from the single currency bloc ended with a proposal for Athens to agree to money-saving contingency measures. These could be enacted if the reforms already agreed prove to be insufficient for Greece to meet agreed budget surplus targets.
Greece clinched an €86bn (£67bn) bailout last summer – its third such package of emergency loans – in return for promising to reduce its deficit with measures such as higher VAT rates and pension cuts. It now urgently needs more funds to be disbursed from that bailout as big repayment deadlines approach on some of its bonds.
But eurozone policymakers and the International Monetary Fund have been at odds over whether Greece can achieve agreed fiscal targets – including a primary surplus on public finances of 3.5% by 2018. The IMF is sceptical that the goal can be reached without extra reforms. The Fund also wants the European Union to provide significant debt relief for Greece before getting behind the country’s third bailout package.
There were signs of breakthrough at talks in Amsterdam on Friday where lenders called on Greece to pass extra measures into law as an insurance policy – only to be enacted if budget goals appear off target. Those contingency plans, equivalent to 2% of GDP, should allow Greece and its lenders to discuss debt relief while also unlocking further chunks of bailout money yet to be disbursed.
Jeroen Dijsselbloem, the Dutch finance minister and leader of the Eurogroup of eurozone finance ministers, said that after talks in Amsterdam, Greece would go away and work both on a possible upfront package of measures, as well as a package of contingent measures.
The Eurogroup would then probably meet again on Thursday next week, to discuss the proposed measures and there would also be a “serious conversation” about a debt relief package for Greece, he said.
He was upbeat on progress being made between now and Thursday. “We will all have to bridge our differences. For some of course, the contingency measures are difficult, and for some debt is a big issue, politically difficult,” Dijsselbloem said.
“But on all sides it was very constructive today and there was an open attitude to cross that bridge.”
The Dutch minister said that “in order for the contingency measures to be credible, they need to be legislated” and the IMF also said it wanted to see them passed into law. But Greece itself raised doubts about meeting those demands.
The Greek finance minister, Euclid Tsakalotos, told journalists it would not be possible to legislate for contingency measures, because Greek law would not allow it. He said Greece and its lenders would instead have to find “a commitment mechanism”.
Figures from the European statistics body Eurostat this week showed that Greece had achieved a better-than-expected primary budget surplus last year. That prompted the country’s leftwing government under its prime minister, Alexis Tsipras, to argue again for debt relief over new austerity measures.
Diego Iscaro, senior economist at the consultancy IHS Global Insight, said those budget figures had emboldened Athens in its claims that it could be trusted on getting the deficit down.
But Iscaro expected the current negotiations between Greece and its official creditors to remain difficult. Last year’s outcome would not change things dramatically “as the IMF’s main concern is the long-term sustainability of Greece’s debt levels”, he said.
guardian.co.uk © Guardian News and Media Limited 2010