VALLETTA, Malta
Greece gave in and accepted a tough set of reforms with its Eurozone creditors on Friday in hopes of unlocking bailout cash in time to avert a looming debt default.
Eurozone finance ministers meeting in the Maltese capital of Valletta said Athens agreed in principle to the new reforms and technical teams would visit Greece as soon as possible to seal the deal.
“The big blocks have now been sorted out and now we just have the final stretch,” Eurogroup head Jeroen Dijsselbloem said after the talks.
Heavily-indebted Athens and the EU and IMF which handle the bailout, have been deadlocked over reforms for months amid disagreements on debt relief and budget targets.
The deal is needed in order to prevent the country defaulting on its creditors as early as July, when Athens owes about seven billion euros ($7.4 billion) in debt repayments.
The Eurozone is under heavy pressure to end the feud in order to avert a chaotic default and inflicting damage on an already stalled Greek recovery.
Despite projections for growth, the Greek economy actually stalled in 2016 and recent data show that after some stabilisation, it has begun to falter again amid uncertainty triggered by the row.
“Greece needs this; we must end the uncertainties that are scaring investors,” EU Economic Affairs Commissioner Pierre Moscovici said.
Dijsselbloem said the Greek government accepted to reduce pensions in 2019 and lower tax breaks in 2020 in return for a bailout payment despite widespread public opposition to the new measures.
Greek Finance Minister Euclid Tsakalotos said the commitments would pass through parliament as soon as possible, although the gamble relies on his Syriza party’s razor-thin majority.
‘Before summer’
Tsakalotos said his Eurozone counterparts had also agreed that Greece could boost social spending if budget targets were met, and that debt relief would also come back to the table.
“We will be ready for all the pieces of the puzzle to fit in for the discussion on debt,” said Tsakalotos, for whom debt relief is a key demand.
“I think we will have (a solution) well before summer,” he added.
The accord was a victory of sorts for Dijsselbloem who visited Brussels and Berlin ahead of Friday’s talks in hopes of finding a compromise.
Prime Minister Alexis Tsipras had until now refused to accept reforms beyond the term of Greece’s current bailout that is due to end in 2018.
The impasse has held up the latest instalment of Greece’s 86-billion-euro ($92-billion) bailout, agreed in 2015 with the 19 countries that use the single currency.
Without a deal in Malta, Tsipras had said he would ask for a Eurozone leaders summit later this month, and made his case in a phone call to German Chancellor Angela Merkel, Europe’s most powerful leader.
‘Credible strategy’
Also pressing matters is a desire by Eurozone ministers to present a united front to the International Monetary Fund (IMF) later this month at the fund’s annual meetings in Washington.
The Europeans have been at loggerheads with the IMF over the Washington-based lender’s demands for more realistic budget targets and firm commitments to reduce Greece’s mountain of debt.
An agreement among Eurozone ministers would go a long way towards getting the IMF on board as a financial partner in the bailout, a major demand of Germany, Greece’s biggest lender.
The IMF, which has so far stayed out of the current rescue, praised the progress made, but warned that Greece’s huge debt pile remained a big problem.
Eurozone ministers must “ensure satisfactory assurances on a credible strategy to restore debt sustainability, before a programme is presented to the IMF executive board,” said IMF spokesperson Gerry Rice.
