Author: Eric Maurice
Posted: November 8 2016
Greece’s creditors hope to reach an agreement with Athens on the second part of the bailout programme before the end of the year, in order to secure the International Monetary Fund’s (IMF) participation in the future.
“I’m confident that we can find a good agreement as soon as possible,” EU finance commissioner Pierre Moscovici said after a Eurogroup meeting on Monday (7 November).
The programme’s second review, which started at the end of October with an expert mission in Athens, will focus on labour market and social system reform as well as Greece’s fiscal trajectory for the coming years.
Eurozone finance ministers and creditor institutions – the European Commission, the European Central Bank, the European Stability Mechanism and the IMF – will decide at the next Eurogroup on 5 December if all the requirements are being met.
“Progress is being made,” Eurogroup president Jeroen Dijsselbloem said after the meeting, adding that it was “obviously in everyone’s interest” to conclude quickly.
Also on 5 December the ESM will present its measures to ease Greece’s debt burden in the short term. The measures were agreed in principle in May, as the IMF made debt relief a condition of it staying on the programme.
The fund regards Greece’s debt as not sustainable. Under its rules, it cannot support a country with unsustainable debt.
The two processes – the review and debt relief measures – are linked because they will have a mutual impact, especially on how and to what extent Greece can reduce its budget deficit.
The more Greek authorities can reduce spending and increase income, the less debt relief will be necessary and the easier it will be to reconcile the IMF’s demands with Germany’s opposition to long term debt relief.
“Greece has done a very good job so far, privatisations in particular have helped. But Greece has to do more before we talk about debt relief,” one participant in the meeting said.
The May agreement said that the IMF representatives would go to the fund’s board before the end of the year to recommend to stay on board of the programme, if they consider that Greece’s debt is sustainable.
So far, EU officials are confident about the outcome of the IMF assessment.
Dijsselbloem said that the IMF representative assured at the meeting that it was “still their strong intention,” while French finance minister Michel Sapin said that “the IMF will be here at the start of next year.”
The ESM chief Klaus Regling said he was “optimistic solutions that will really have a visible, positive impact on Greek debt sustainability” can be found.
The Eurogroup met a few days after Greek prime minister Alexis Tsipras reshuffled his government in an apparent move to facilitate talks with creditors.
Energy minister Panos Skourletis, who is opposed to privatisations, was moved to the interior ministry and replaced by economy minister George Stathakis, a supporter of reforms asked by the creditors.
Labour minister George Katrougalos, another cabinet member in charge of a difficult programme issue, was appointed deputy foreign minister and replaced by his deputy Effie Achtsioglou, a 31-year-old used to negotiations with the creditors.
A close aide to Tsipras, former spokeswoman Olga Gerovasili, was appointed minister for administrative reform, another key issue to implement the programme.
The reshuffle was “positively seen as a will to continue on the same path, get a second wind and smooth out difficulties,” French minister Sapin told EUobserver.