Greece missed its own April 22 deadline for reaching a deal with international creditors as talks over terms of a third bailout have stalled, world press reports say.
No Deal Between Greece and Lenders
Reuters/Jan Strupczewski and Francesco Guarascio
There will be no deal between Greece and its lenders on Friday that would unlock loans and enable vital debt relief talks, despite some progress on the reforms Athens must implement in exchange, euro zone and IMF officials said on Friday.
“Don’t expect any deals today,” the chairman of euro zone finance ministers Jeroen Dijsselbloem told reporters, noting however, he was “hearing good news from Athens” on headway made in negotiations on a Greek reform package.
“There is more work to be done. We are determined to continue the work. We’re not there yet,” International Monetary Fund Managing Director Christine Lagarde said.
The package of reforms is aimed at producing a primary surplus of 3.5 percent of gross domestic product in 2018 “and beyond”, according to a deal between Athens and euro zone governments signed last August.
But there is disagreement between Greece, the euro zone and the IMF on whether the measures, which include pension and income tax reform and setting up a privatization fund and a scheme to deal with bad loans, will be enough to reach that number.
The IMF believes that as things stand now, instead of 3.5 percent of GDP, Greece will only achieve a primary surplus – the budget surplus before debt-servicing costs – equivalent to 1.5 percent of economic output in 2018.
The Fund and the euro zone are also at odds over how long Greece will be able to maintain a primary surplus of 3.5 percent and therefore its ability to service its public debt in the long run. The debt stood at 177 percent of GDP last year.
Greece, Creditors Make Progress On Differences
The Wall Street Journal/Gabriele Steinhauser and Viktoria Dendrinou
AMSTERDAM—Greece and its creditors made a big jump Friday toward resolving disagreements that have long hobbled the country’s international bailout program, including how to ease its debt burden.
Eurozone finance ministers agreed that Greece will have to prepare extra austerity measures to be implemented if it fails to reach budget targets under its bailout program.
Provided those extra measures, and others already agreed to last summer, can be nailed down in the coming days, ministers could discuss how to lighten Greece’s massive debt load as early as Thursday, said Jeroen Dijsselbloem, the Dutch finance minister who presided over Friday’s meeting.
A review of whether Athens is implementing the conditions linked to its latest rescue has been dragging on for months, partly because the International Monetary Fund questioned whether the government can cut spending enough to repay its debt.
“We came to the conclusion that the policy package should include a contingent package of measures,” said Mr. Dijsselbloem.
The extra measures will have to generate extra savings worth 2% of Greek gross domestic product, he said. That comes on top of measures worth 3% of GDP that are part of the first program review.
Those contingency measures are meant to ensure that Greece can reach an annual primary surplus, which strips out interest payments, of 3.5% of GDP by 2018. The IMF has raised doubts over whether that is possible.
Mr. Dijsselbloem also said that ministers had given a mandate to European institutions to prepare some ideas on how to further ease Greece’s debt.
The IMF’s managing directer, Christine Lagarde, stressed that contingency measures will only be a convincing solution if they are already put into law and can be triggered without a lengthy discussion between Greece and its creditors.
Greece Eyes Path to Lifeline, Fiscal Resurrection in Doubt
Bloomberg/Ian Wishart, Nikos Chrysoloras, and Corinna Ruhe
Almost seven years after sparking the euro-area debt crisis, Greece faces a new budget confrontation with creditors amid fresh German warnings that its long-term success is far from assured and the International Monetary Fund raising questions about the latest economic data.
Finance ministers representing nations that use the euro are meeting in Amsterdam on Friday to assess Greece’s eligibility for more aid payouts under the country’s third bailout since 2010.
A year ago, a similar gathering put the newly elected government of Prime Minister Alexis Tsipras on a collision course with Europe that almost forced Greece out of the 19-nation bloc.
A faction of the creditors want Greece to commit to further austerity measures in the event the nation doesn’t comply with the budget targets set out in its bailout program, an unpalatable proposition for the government in Athens that was elected on a promise to unwind the strict economic rules.
While Greece doesn’t face an immediate threat of a return to the drachma, concern that the country can’t commit to fiscal rectitude and a mountain of debt are reviving questions about its long-term viability.
“I’m not sure it will work,” German Finance Minister Wolfgang Schaeuble, the most powerful minister in attendance, said this week in Berlin when asked about the outlook for Greece’s latest rescue.
As he entered the meeting on Friday, Schaeuble said “it doesn’t look so pessimistic” on the short-term question of whether the Tsipras administration and creditors can reach a deal after months of talks on the release of another aid installment as long as there are “efforts by all sides.”
While poor governance skills, inexperience and a provocative style all combined last year to unify the rest of the euro area against Tsipras, concrete budget achievements, a more diplomatic style and a European migration crisis with Greece at its epicenter have given the government some leverage.