BRUSSELS – Citing a primary surplus, Greece on April 25 made an official request for relief from the 240 billion euros ($330.7 billion) it owes international lenders, although what form that would take was unclear.
The government previously said it wanted either a cut in how much it owes to the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) or for a lower interest rate and a longer time to repay.
IMF chief Christine Lagarde and German Chancellor Angela Merkel, whose country is putting up much of the loan money and insisted on harsh austerity in return, have both ruled out any chance of a so-called “haircut” in which Greece would be allowed to forego payment on a big chunk of its loans, much as it did when stiffing private investors with 74 percent losses.
The government has varied on what form of debt relief it said it would need. Most of the monies from the two rescue packages run out this year.
A Greek haircut would force taxpayers in the other 17 countries that use the euro to pick up the tab for generations of wild overspending by successive Greek governments, a politically unpalatable prospect for EU government leaders.
The request came at a meeting of the Euro Working Group (EWG) of Eurozone finance ministers. The memorandum of agreement with the Troika allowed Greece to seek relief if it achieved a primary surplus, which the EU’s statistics agency Eurostat said it had, certifying it was 1.5 billion euros, about $2.07 billion.
The EWG, satisfied that Greece had made enough progress in reforms after negotiations with the Troika, approved the release of another 6.3 billion euros ($8.72 billion) in bailout funding.
Panos Tsakloglou, chairman of Greece’s Council of Economic Experts, reminded his counterparts of the Eurogroup’s November 2012 pledge to examine debt relief steps once Greece produced a primary surplus.
Sources told Kathimerini that the other members of the EWG agreed that these discussions should take place during the course of the next Troika review of the Greek adjustment program.
The Eurogroup’s advisory body also agreed that Greece’s next loan tranche should be disbursed. The European Financial Stability Facility (EFSF) announced that it would be transferring 6.3 billion euros to Greece, lifting its overall total to 139.9 billion euros ($193.65 billion).
Two more installments of one billion euros ($1.38 billion) each are due to be released in the weeks to come as long as Greece meets reform milestones agreed with its lenders.
“I am very encouraged by the progress Greece has made in its adjustment program, as evidenced by the primary budget surplus for 2013 and the return to bond markets,” said EFSF CEO Klaus Regling.
“These accomplishments were possible thanks to the determination of the Greek authorities and the efforts of the Greek people. In order to achieve sustainable economic growth in Greece, the reforms need to be continued.”
The IMF’s Executive Board is due to meet in mid-May to approve the release of two installments worth 3.6 billion euros ($4.98 billion).
IMF spokesman Gerry Rice said that he also expects talks on debt relief to take place in the second half of this year.
“The time line that we’re now on for those discussions is orderly and I think will enable the international community to support Greece’s continuing recovery,” Rice said.