The deal reached at Tuesday’s Eurogroup meeting (24 May) “politically benefits all sides”, diplomatic sources close to the negotiation have told euractiv.com.
Eurozone finance ministers agreed with Greece to start debt relief for Athens, as demanded by the International Monetary Fund, and to unlock €10.3 billion in bailout cash.
Berlin has always pushed for the International Monetary Fund to remain in the Greek bailout program as a red line. With the new deal, the IMF will stay “at least at an early stage in the program”.
The IMF representative said yesterday that, based on the provisional framework on debt relief, he would make a recommendation to the IMF board to join the programme but its future presence will depend on its own debt sustainability analysis.
In addition, the sources explained, Germany did not want any discussion on Greece’s long-term debt sustainability before their federal election in 2017. The Eurogroup focused on short-term debt measures, leaving any decision on genuine debt relief until 2018, after those elections.
According to the Eurogroup’s decision, finance ministers agreed on a contingency mechanism which would be activated after the European Stability Mechanism programme to ensure debt sustainability in the long run “in case a more adverse scenario were to materialise”.
Jeroen Dijsselbloem, the Dutch president of the Eurogroup, also stressed that long-term the group was confident that the implementation of the deal on the main features for debt measures, together with a successful implementation of the Greek European Stability Mechanism programme and the fulfilment of the primary surplus targets, “will bring Greece’s public debt back on a sustainable path over the medium to long run and will facilitate a gradual return to market financing”.
Athens “took a breath”
The Syriza-led government expressed satisfaction at the Eurogroup’s decision.
Greece’s Finance Minister Euclid Tsakalotos said after the meeting that the deal would be a great chance for Athens to turn the page.
“There is some ground for optimism that this can be the beginning of turning Greece’s vicious cycle of recession-measures-recession into one where investors have a clear runway to invest in Greece and turn the corner in favour of the virtuous cycle,” he said.
Greek government sources told EURACTIV that with the Eurogroup’s agreement “a circle of uncertainty closes”. “The adventure is over and Athens sends a message of delivering [its obligations] while simultaneously enjoying EU partners’ trust.”
The government official stressed that a big part of the €7.3 billion tranche due on June will be used for boosting the real economy, adding that those who betted on a Eurogroup deadlock and asked for a snap election, had lost.
The official also denied reports in Athens suggesting that the Greek premier was mulling a reshuffle of his government, saying there was no such possibility until at least September.
However, Moody’s agency warned today that “high risks” still remain for the implementation of the agreement, despite the Eurogroup’s positive decisions.
The causes of the uncertainty, Moody’s noted, range from the small majority of the coalition government in parliament to a backdrop of political and social discontent that exists across Greece due to the new, tough austerity measures.
IMF and Brussels
Referring to IMF’s “gains”, the same sources noted that it managed to ultimately convince EU partners that Greece’s debt was not sustainable.
The Fund has long insisted that Greece’s debt was not sustainable and that immediate measures for its restructuring were needed.
For Brussels, a “sensitive political front” had closed, the sources explained.
“Now there is room to focus on the upcoming UK referendum on 23 June as well as the Spanish elections three days after.”
Spanish left-wing party Podemos recently formed an alliance with other smaller leftist parties to boost its support ahead of next months’ general election, raising eyebrows in EU circles.