Sat, Jun 17, 2017 - Page 10 News List

Greece gets enough to avoid bailout

SAFETY NET:The new deal might include a measure linking repayments to growth, meaning that payments could be postponed in the event of an economic downturn


European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici, left, on Thursday speaks to Greek Minister of Finance Euclid Tsakalotos at the start of the Eurogroup meeting in Luxembourg.

Photo: EPA

Greece avoided another potential brush with bankruptcy on Thursday after striking a deal with European creditors to tide it over for the rest of the year and gained assurances that its repayment burden would be eased when it can finally stand on its own after nearly a decade on financial life support.

After months of haggling that raised fears of another escalation in Greece’s nearly eight-year debt crisis, the 19-nation eurozone cleared the release of another 8.5 billion euros (US$9.5 billion) after the Greek government delivered on an array of reforms.

Getting the money was becoming urgent as Greece has a big repayment hump next month.

Perhaps more importantly for the longer-term, the Eurogroup made clear that it is ready to ease the burden of Greece’s debt repayments at the conclusion of the current bailout program next year.

The IMF might also get involved financially on a limited basis of up to US$2 billion.

“Overall, I think this is a major step forward,” Eurogroup President Jeroen Dijsselbloem said. “We are now going into the last year of the financial support program for Greece; we will prepare an exit strategy going forward to enable Greece to stand on its own feet again over the course of next year.”

He singled out the Greek people for their “intense efforts and resolve” over the past few years of the nation’s bailout era when successive governments had to enact drastic spending cuts and tax increases in return for the money needed to avoid bankruptcy and a possible exit from the euro currency.

The left-led Greek government, which has lost a lot of support since signing up for the nation’s third bailout even after campaigning against austerity, hopes the deal would help it get to a position to tap the international bond markets that lost faith in 2010 and forced Greece to rely on rescue money.

“We feel that after this Eurogroup [agreement], there is a much greater clarity for both the Greek people and for financial markets,” Greek Minister of Finance Euclid Tsakalotos said.

There is now “light at the end of the tunnel,” he said.

The office of Greek Prime Minister Alexis Tsipras said in a statement that the decision sends markets a positive message.

“The main point of today’s decision is that — for the first time — there is a clear Eurogroup commitment to support Greece’s market access and the successful completion of the program, with the creation of a significant liquidity reserve to back the country’s market access,” it said.

Among the measures offered to Greece was a possible 15-year extension in debt and interest payments due to European creditors.

In addition, following a recommendation from the new government of French President Emmanuel Macron, the possibility was raised of linking Greek repayments to growth, which could mean debt repayments would be postponed in the event of an adverse shock.

In return for these assurance, Greece’s government would have to continue with strict budgetary discipline beyond the end of its bailout program, including running a budget surplus after debt and interest payments of 3.5 percent of GDP through 2022 and then about 2 percent until 2060.

Despite years of austerity since Greece was first bailed out in 2010, the nation’s debt burden still stands at about 320 billion euros, or around 180 percent of Greece’s annual GDP.

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