Washington, DC.- (GreekNewsOnline, ANA-MPA)
The acceleration of the Greek debt decision-making process as well as the implementation of the policies provided by the program, were the issues discussed on Saturday, during a meeting between IMF Managing Director Christine Lagarde and Greek Finance Minister Euclid Tsakalotos, on the sidelines of the International Monetary Fund’s and World Bank’s Spring Meeting in Washington.
In a statement following their meeting, IMF Managing Director Christine Lagarde said:
“I had a productive meeting today with Greece’s Finance Minister Euclid Tsakalotos and his team. We discussed the importance of bringing discussions on debt to an early conclusion and accelerating implementation of program policies, both of which are critical for boosting economic prospects and making IMF financing available.”
Finance Minister Euclid Tsakalotos concluded his visit in Washington with a series of meetings with European officials. Tsakalotos met separately with EU Finance Commissioner Pierre Moscovici, Eurogroup President Mario Centeno, French Economy Minister Bruno Le Maire and European Central Bank President Mario Draghi.
A Finance Ministry source said “the meetings were held in a good climate,” but did not elaborate.
Tsakalotos also presented the prospects of the Greek economy at a one-day meeting organised by JP Morgan for institutional investors and bankers.
Euro zone creditors are working on a debt relief offer for Greece that would be an incentive for Athens not to backtrack on reforms from its three international bailouts and to continue to stick to prudent fiscal policy, senior EU officials said.
Greece is to exit its bailout on Aug. 20 and return to market financing after eight years of living on cheap euro zone loans it got in return for painful reforms, after investors refused to lend to it in 2010 because of its ballooning deficit and debt.
Once the bailout ends, Greece will be free to set its own economic policy – a political turning point for the country that has long been forced to implement highly unpopular reforms suggested by the euro zone and the International Monetary Fund.
But many officials are worried that as time passes, Greek politicians will be under increasing pressure to loosen budget strings again, so they are seeking ways to make it worth Greece’s while to be fiscally prudent as long as possible.
Officials said the euro zone offer would have to include some debt relief up front and some spread over time.
Because Greece will not have used all the money earmarked for it in the latest bailout, possibly up to 27 billion euros, this could be used by the euro zone to replace much more expensive IMF loans to Greece with its own, cheaper credit.
While there is no discussion of a reduction of the nominal value of the Greek debt, Greece might also receive back the profits made by euro zone national central banks on their portfolios of Greek bonds and see maturities and grace periods on euro zone loans extended.
As part of the debt relief plan, Greece is to present next week at a meeting of euro zone finance ministers in Sofia its own plan for boosting economic growth.
Euro zone officials say it is a crucial part of the plan, because no outside incentives for sound policy will work well if Greece itself does not believe in the suggested policy.
The last hurdle to qualify for the euro zone debt relief offer is for Greece to implement 88 so-called prior actions – final reforms agreed with the creditors – by the end of May, so that euro zone finance ministers can review and approve their completion at a meeting on June 21.
Talks on the Greek program are being held in a constructive manner on the sidelines of the IMF’s spring meetings in Washington, European Union economy commissioner Pierre Moscovici told the Athens-Macedonian News Agency, stating his confidence that the program will be completed “on time.”
“There is a common intent among all involved to complete (the program) and also the feeling that this is the duty we have towards Greece, that must stand on its feet and become once again a regular eurozone country. But also towards the eurozone itself as after ten years, the day that the Greek program will end will be a positive sign that we have left the crisis behind us,” he said.
Moscovici also clarified that there is no talk of a change, or an extension, to the program, saying that “we will do everything to stick to the time schedule, which means having a decision, if possible, at the June 21 eurogroup, or in July at the latest, so that in August the completion of the program is possible.”
“It is important that at every eurogroup coming up, in April, May, June, for there to be progress. Starting from the next eurogroup, we must work in a way so that step-by-step we move towards the successful completion of the program. I expect that (in Sofia) each side will confirm its commitment to the completion of the program,” said Moscovici.
The EU commissioner also referred to the meeting he had with Greek Finance Minister Euclid Tsakalotos, saying that it is important for the fourth review to be completed on time in May, in a step that requires the remaining reforms to be implemented.
Additionally, he said that the Greek growth strategy will be presented at the Sofia eurogroup next Friday, where the post program supervision will be looked at, that must not be another bailout.
“Greece’s lenders must also assume their responsibilities, which means completing the Greek program on time, ruling out any extension or new program, and clarifying on medium term measures for Greek debt,” he added.
Greece’s creditors are getting closer on a deal to ease the country’s debt burden, according to Eurogroup President Mario Centeno.
Greece’s 86-billion euro ($106-billion) bailout program is set to run out in August, and creditors are working on finding a compromise on debt repayments that would help to manage the country’s financing needs after it stops receiving international aid. A debt deal would also allow the International Monetary Fund to participate in the current bailout.
“The positions today are much closer than they used to be before,” Centeno, who is Portugal’s finance minister and chairs the meetings of his euro-area counterparts, said in an interview in Washington. “We still have a final mile to go but there is a positive sentiment around the table so I think that reflects a true willingness to be part of the program.”
Further easing Greek debt is a key precondition for the Washington-based IMF before it can participate in the country’s program. While the IMF has co-financed Greece’s first two bailouts it hasn’t yet activated its third one, arguing the euro area must arrange for more debt sustainability. But the participation of the fund, even a few months before the end of the bailout, is important for some countries including Germany, who see the IMF coming on board as a seal of approval that will offer credibility to the bailout.
A “committed presence” by the IMF will also help with market confidence, Centeno said.
Talks among Greece’s creditors and euro-area countries on likely debt measures have been going on at a technical level for months. That includes a proposal to link debt repayments to economic growth, so the country can pay back more if it is doing well, and less if it isn’t. The aim is to have a final agreement in the early summer, but key differences among creditors on the scope and type of debt relief persist.
The IMF would like to see wide-scale debt relief on all of Greece’s euro-area loans –including those from other countries and the bloc’s bailout fund. That demand is facing resistance by many European creditors who are only willing to discuss easing the terms of some loans.
Other disagreements have to do with whether the debt relief will be granted to Greece unconditionally or whether it should be tied to budget discipline and further economic reforms. The differences were discussed at a meeting of officials from Greece’s key creditor countries and institutions on the sidelines of the IMF meetings in Washington this week.
In order for the IMF to have sufficient time to activate its bailout for Greece before it runs out in August, an agreement on all these parameters will likely need to be struck by the end of next month.
For Centeno, the key is that any conditions attached to debt relief come from Greece’s own plans for growth. “We all want debt conditionality to be embedded in the growth strategy for Greece,” he said, referring to the country’s plans for the economy in its post-bailout life.
“Ownership is the single word that may and should define the process in the coming months.”
“The Greek government needs to stick to the implemented reforms and post-programme fiscal trajectory, which means sustained large levels of primary surpluses for an extended period of time,” European Commission Vice President Valdis Dombrovskis told Reuters in an interview.
Officials say a well-designed offer of further debt relief for Greece could provide an incentive for Athens not to stray from the agreed reform path and keep a high primary budget surplus – the balance before debt servicing costs – of 3.5 percent of GDP, until at least 2022.
“We think it is fully realistic,” Dombrovskis said. “We expect Greece being on track with the fiscal trajectory.”
Another way of ensuring Greece sticks to sound policies would be through extending a precautionary credit line from the euro zone bailout fund ESM to Greece, because such a credit line comes with conditions.
But this is why Athens does not want it, and the euro zone neither can, nor wants to force Greece into some new bailout in disguise.