Greece runs the risk of having to withdraw from the eurozone if it does not comply with its payment and reform obligations, says the European Stability Mechanism’s Managing Director, Klaus Regling. EURACTIV Germany reports.
“This threat as a possibility must always be there and is still there,” said Regling on Thursday (27 August) in Berlin. For Regling it was only logical that the risk of a Grexit be discussed during the negotiations on the now adopted third bailout package.
However, Regling is confident about developments in Greece, despite the recent drama and upcoming elections. If the country upholds its side of the agreement, then he thinks it “likely” that Athens could exit the aid programme within three years. Therefore, the current figure of €86 billion in aid would be reduced. “I can give no guarantee of success, but I see good signs of successful development,” said Regling.
The head of the ESM also fully expects the International Monetary Fund (IMF) to contribute to the aid package in the autumn. Its participation in the third bailout package has so far been uncertain due to the Fund’s doubts about the sustainability of Greece’s debt. Regling believes that the IMF could contribute aid of “up to €16 billion”, as it has unused funds at its disposal from the previous bailout package.
A precondition of IMF involvement is more debt relief for Athens. According to the IMF’s criteria, the current debt burden of the country is too high for a new aid package. The German government remains opposed to a further haircut.
Further debt relief is possible though, said Regling. Therefore, Greece could begin interest payments later and the loans could be extended. The resulting relief on Greece’s public finances will in the meantime be noted by the IMF, Regling added. “According to our calculations not very much is required in order to comply with certain criteria.” He declined to provide specific figures.
After much wrangling, the third Greek bailout package will comprise of up to €86 billion over the next three years and will be dependent on the implementation of strict reform and austerity measures. The aid will be provided by the eurozone states and distributed by the ESM.