Greece calls for debt relief as bailout talks resume in Athens

Greek Prime Minister, Alexis Tsipras speaks during a joint statement held on the occasion of the Southern European Countries Summit, at El Pardo Palace. Madrid, 10 April. [Juan Carlos Hidalgo/EPA]

Greece’s prime minister held out for a commitment from lenders to debt relief on Tuesday (25 April), and said he was confident new talks in Athens over a long-stalled bailout review would reach a deal by a 22 May target.

Talks over reforms in the energy and labour market and pension cuts and income tax increases have dragged on for months, mainly due to differences between EU lenders and the International Monetary Fund over fiscal targets.

Athens and the lenders reached a preliminary deal this month in Malta on key elements of reforms to produce savings worth 2% of gross domestic product.

Greece's lenders shift from austerity to reforms

The Eurogroup took a small step on Monday (20 February) towards the completion of the second review of Greece’s €86 billion rescue programme, placing the emphasis on reforms over austerity to reduce the country’s huge debt pile.

Tsipras, who faces national elections in 2019 and whose popularity is sagging, said the country would legislate the additional measures sought by its lenders but implementing them was contingent on securing further debt relief.

“We will obviously legislate (the measures) in order to secure a deal on debt relief,” Greek Prime Minister Alexis Tsipras told ANT1 television. “They won’t be implemented … unless we get a solution on debt.”

He added that a sovereign government had the right to back out of a deal if its interlocutors did not respect it.

IMF insists that Greece needs a debt restructuring

The International Monetary Fund (IMF) will participate in the Greek bailout programme on the condition that the country’s debt is sustainable and, thus, a restructuring will be needed, IMF chief Christine Lagarde warned on Tuesday (18 April).

Greece wants to conclude the bailout review as soon as possible to qualify for inclusion in the European Central Bank’s quantitative easing programme and return to bond markets.

“Our aim is to conclude the bailout review and immediately after that to return to markets,” Tsipras said. He was speaking two days after the seventh anniversary of Greece’s call for international aid to avert bankruptcy.

Tsipras said the return to markets should be “sustainable” and not a “one-off”, to help it emerge from crisis by 2018, when its third bailout expires.

He added the country aimed to reach a deal by 22 May, when eurozone finance ministers are expected to discuss the Greek issue.

“On 22 May, which I want to believe is a realistic target, we’ll also have a comprehensive deal, including debt,” he said.

IMF role

The date to conclude a deal on a so-called review of Greece’s bailout progress has been a moving target. It was supposed to have been wrapped up late last year.

The talks, at a central Athens hotel, focused on energy reforms and a privatisation fund on Tuesday.

Greece agrees with lenders to sell some power plants

Greece has agreed that its main power utility, Public Power Corp (PPC), will sell some coal-fired plants as part of bailout reforms, two sources close to the talks said today (29 March).

Concluding the review of Greece’s progress will also unlock funds which Athens needs to repay loans maturing in July.

Greece has agreed to implement more austerity after the bailout expires in 2018, to persuade the IMF to participate in an €86 billion bailout package, the third rescue plan since the debt crisis began.

Greece attained a 4.2% of GDP primary surplus last year, significantly above the target set in its bailout. But the IMF says the country cannot maintain high fiscal surpluses and wants assurances from euro zone governments that Greek debt will be made sustainable, before it will join the bailout.

Greek 2016 primary surplus at surprisingly high level

Greece in 2016 registered a primary surplus of 3.9% of output, its statistics agency said today (21 April), in an important announcement for the country’s reform talks with its creditors.

Germany, which faces elections in September, wants the IMF on board to add credibility to the bailout, but it is also crucial for Tsipras who argues debt relief is needed for a nation which has suffered from years of austerity.

Athens and its lenders are discussing a set of measures offsetting the impact of austerity in 2019 and 2020, on condition that Athens outperforms its targets. These measures include reducing taxes.

US government ‘open’ to IMF participation in Greek bailout

Washington will keep an “open mind” regarding the participation of the International Monetary Fund (IMF) in the Greek bailout programme, a senior US Treasury official said yesterday (13 April).

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