Eurozone officials hope to give Greece next tranche of bailout | The Knowledge Dynasty

Eurozone officials hope to give Greece next tranche of bailout

Greeces creditors are still at odds over whether the recession-hit country has taken enough measures to unlock delayed 10bn of bailout funds

European officials are preparing to unlock 10bn in bailout money for Greece, as an ongoing row between the countrys creditors threatens to plunge the eurozone back into crisis.

Greeces international creditors remain deadlocked over how to reduce the recession-hit countrys 321bn (245bn) debt mountain, worth 180% of annual economic output.

The International Monetary Fund has threatened to walk away from the Greek bailout unless substantial debt relief is agreed, but Germany maintains there can be no changes before 2018.

Going into the talks between 19 eurozone finance ministers in Brussels, Valdis Dombrovskis, the European commissioner in charge of the euro, said he hoped to see an agreement in principle, including on disbursement of bailout funds.

After months of wrangling, eurozone ministers are close to an agreement that will give Greece access to a 10.3bn (7.8bn) tranche of bailout funds, split into two payments: 7.5bn in June and 2.8bn in September.

If agreed, the 10.3bn would be the long-delayed second instalment of Greeces third bailout agreed last August, worth 86bn.

Athens cleared the way for the latest instalment earlier this month when it agreed on contingency measures spending cuts and tax increases worth 3.6bn that will come into force if it fails to meet its fiscal targets.

Several eurozone finance ministers said Greece had done enough to get the next bailout cheque, hailing the latest austerity measures, an unpopular series of tax hikes pushed through by the Greek parliament on Sunday.

The Syriza-led government of Alexis Tsipras voted through 1.8bn of revenue-raising measures, including tax increases on coffee, tobacco, internet use and an increase in VAT. The government has also created a privatisation fund to sell off state assets, in effect security for the loans.

Frances finance minister, Michel Sapin, said: Greece needs room to breathe, it needs certainty. It has made considerable efforts, which again we have seen this weekend in adopting a difficult package of measures. Even fiscal hawks, such as Slovakias Peter Kaimr, agreed it was important to agree the next bailout tranche because we dont need another liquidity crisis, a reference to the dramatic events of last summer when Greece teetered on the brink of financial meltdown.

Consensus on the bailout payment meant the most difficult task for the meeting was squaring the differences between Greeces creditors.

In a hard-hitting assessment published on the eve of the meeting, the IMF said Greece had no chance of meeting the terms of its current bailout plan without debt relief. According to the IMF forecast, Greece will be burdened with debts worth 250% of GDP by 2050 without a substantial reprofiling of the terms of loans to Greece.

Reprofiling, by extending repayment terms and fixing interest rates at low levels, could reduce Greeces debt burden to 100% of GDP by 2050, according to the IMF.

But Germany has been reluctant to make concessions on debt relief ahead of federal elections, due in October 2017 at the latest. Arriving at the meeting, Germanys finance minister, Wolfgang Schuble, said that a decision on Greeces debt relief could only come in 2018 at the end of the current bailout.

The eurozone and the IMF have also been sparring over the robustness of fiscal forecasts drawn up in Brussels. Eurozone officials think Greeces austerity plans could generate a regular budget surplus of 3.5% of GDP. But IMF director Christine Lagarde has described this scenario as a far-fetched fantasy. The funds officials argue that a surplus of 1.5% is more realistic, although even this would be ambitious as it would require much stronger resolve than the Greek government has shown in the past in maintaining tight spending plans.

One plan under discussion was to require Greece to run a primary surplus of 3.5% of GDP until 2018, but leave later targets open-ended for now.

Eurozone countries are anxious for the IMF to stay in the Greek rescue effort. It is not an option to go on without the IMF, said Jeroen Dijsselbloem, the Dutch finance minister and eurozone chair.

Greece has until July before it needs to make a debt repayment a 3.5bn payment due to the European Central Bank. But eurozone finance ministers are anxious to wrap up an agreement on the funds, well before the UK referendum and Spanish elections in June.

Read more: https://www.theguardian.com/world/2016/may/24/eurozone-officials-hope-to-give-greece-next-tranche-of-bailout

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