Greece gets 8.5B euros plus promise of future debt relief

Henrietta Brewer
June 16, 2017

"I think that's really the best agreement we've had for quite a while", said Pierre Moscovici, the top economy official for the European Union, the broader 28-country bloc that includes the 19 states using the euro.

The IMF had insisted repeatedly that Greece's debt is not sustainable and the country would require significant debt relief from Europe before the fund could approve a new loan programme.

Thursday's compromise agreement with International Monetary Fund shows that the disagreement has yet to be fully dealt with.

We will bring reaction to the Greek deal and any developments a Ecofin.

"We'll get there on Thursday, you'll see", German Finance Minister Wolfgang Schaeuble, the eurozone's most influential official, said at a Bloomberg event on Tuesday in Berlin.

They said in their statement that the exact mechanism of how to link debt relief to growth would be worked on as of 2018 by deputy finance ministers and treasury officials and be announced after the bailout ends, together with the whole debt deal.

But ministers said that while Greece would get more "clarity" on a long-desired agreement on cutting its mountain of debt, there could be no actual deal on that subject until later.

"This is a major step forward, in our view, coming after many months of uncertainty", HSBC European economist Fabio Balboni said.

Some debt repayments could be delayed by 15 years.

As a consolation, in a compromise negotiated by France, Greece won a certain amount of clarity from the eurozone on debt relief, including an agreement to link debt repayments to Greek growth. His Greek opposite number, Euclid Tsakalotos noted that Greece hoped to be able to return to the worldwide money markets in due course.

"We recognize that we did not want the ideal to be the enemy of the good", he said.

Greece's government is praising a deal it has reached with the country's European creditors regarding its bailout, saying the final decision had met almost all of Greece's demands.

Meanwhile, creditors agreed that Greece's primary surplus, which excludes interest payments and is a key determinant of how much debt relief the country will need, will be around 2 percent of GDP from 2023 until 2060.

However, Christine Lagarde, the IMF's managing director, said enough progress had been made at Thursday's meeting for her to go to the executive board to get the stand-by facility, which will be less than $2 billion.

After three bailouts, Greece's debt now stands at a staggering 180 percent of annual output, by far the biggest national debt pile in Europe. That's largely because the Greek economy has contracted by around a quarter, meaning a worsening in the relative size of the nominal debt even when the annual budget has improved markedly. The release of IMF funds would then be contingent on the implementation of the policies and receipt of debt relief assurances.

An outright cut in Greece's debt is not allowed under euro rules, but the length of time the country has in paying back its debts can be extended, and the interest rates on those debts can be cut.

Many details of the accusations are unknown, but a Greek legal source said the experts were accused of "disloyalty to the public", a crime that carries a 20-year jail sentence.

For austerity-weary Greeks, battered by years of income cuts and tax hikes, the latest deal is unlikely to mean much change any time soon.

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