Brussels: Eurozone finance ministers meet Monday as far apart as ever on the debt relief measures demanded by the International Monetary Fund for it to back their bailout programme for Greece.
The IMF played a key role in two massive rescues for Greece but baulked at a third in 2015, worth €86 billion (Dh336.8 billion, $92 billion), warning that Athens would never get back on its feet unless its debt mountain was cut outright.
The fund is obliged to only lend to countries that can repay and its head, former French finance minister Christine Lagarde, has faced accusations that she bent the rules in the two previous bailouts to help save the Eurozone.
Europe’s largest economy Germany insists meanwhile that Greece must meet all its commitments on spending cuts and tax hikes before measures to reduce a debt mountain equal to some 180 per cent of annual economic output can be considered.
“We are going around in circles,” one EU official said, as an end-of-year deadline to resolve the impasse looms large.
The situation is further complicated by differences within the 19-nation single currency bloc. France for example — where public finances are far from healthy — believes Athens should be cut some slack.
Greek Prime Minister Alexis Tsipras and French President Francois Hollande agreed Saturday that “a deal on a technical level is needed by (Monday) and measures for debt relief by the end of the year are imperative”.
More austerity ‘impossible’
During a May review, the European Union and IMF agreed to start discussions on debt relief by end-2016 if Athens met its reform pledges.
The issue turns on a key figure — 3.5 per cent, the primary balance, or the surplus on the public finances before debt repayments, that Greece is supposed to reach.
The target is very high — and most countries do not even come close — but Germany and other Eurozone hardliners believe it is the only way to solve the issue once and for all, even if Greece has to take additional austerity measures to get there.
For the IMF, that option is totally unrealistic — an economy with an already unsustainable debt burden cannot be expected to tighten the screws further.
A source close to the negotiations suggested the Washington-based lender might appear to go along, “just to show how impossible it is”.
Eurogroup chief Jeroen Dijsselbloem told European lawmakers that debt relief measures would be discussed Monday in the hopes of persuading the IMF to sign on to the bailout.
“The IMF has a point that running a primary surplus of 3.5 per cent of GDP for a very long time is a huge thing to ask and we need to be realistic here,” Dijsselbloem said.
Factbox: Greece needs reforms, not debt relief — Germany’s Schaeuble
Structural reforms rather than debt relief will help Greece to achieve sustainable growth and stay in the Eurozone because rates and repayment are putting hardly any burden on its budget, Germany’s finance minister was quoted as saying on Sunday.
Asked in an interview by Bild am Sonntag newspaper whether it might be time to tell German voters that a debt cut for Greece was inevitable, Finance Minister Wolfgang Schaeuble said: “That would not help Greece.” “Athens must finally implement the needed reforms. If Greece wants to stay in the euro, there is no way around it — in fact completely regardless of the debt level,” Schaeuble said.
Schaeuble, a senior member of Chancellor Angela Merkel’s conservatives, said the Greek budget was hardly burdened by interest rates and debt repayment because its Eurozone partners had already relieved Athens from such duties for a long time.
