Greek Debt-Relief Measures Unblocked by Eurozone
Move eases tensions between Greece and its creditors over bailout
Greece’s eurozone creditors agreed on Saturday to unblock previously suspended debt-relief measures for the country, after Athens assured them that a Christmas gift it offered pensioners would be a one-off.
The move marks an effort to ease tensions over the country’s bailout, fueled partly by Athens’s decision to pursue fiscal largess without informing its creditors and partly by persisting disagreements between the country’s lenders over the economic overhauls Athens must undertake.
The decision to unfreeze the suspended debt relief will offer a much-needed reprieve to Athens and comes as Greece and its international creditors—which include the eurozone and the International Monetary Fund—are struggling to conclude their latest review of the country’s rescue plan of as much as €86 billion ($89.9 billion) in loans.
“Happy to conclude that we have cleared the way for [the eurozone bailout fund] to go ahead with decision-making procedures for short term debt measures,” said Jeroen Dijsselbloem, the Dutch finance minister, who presides over meetings with his eurozone counterparts, on Twitter.
“I have received a letter in which my Greek colleague has confirmed his commitment to previous agreements,” he added.
A decision by the eurozone bailout fund to proceed with the debt relief is expected as a final formal step.
Greek Prime Minister Alexis Tsipras earlier this month promised 1.6 million pensioners a Christmas bonus of between €300 and €800. He also suspended a planned increase in sales tax on Aegean islands that have received large numbers of refugees from the Middle East and elsewhere.
The decision surprised Greece’s creditors, which as a result suspended proposed debt-relief measures for the country. Eurozone officials expressed frustration that the country’s creditors weren’t told in advance by Greece of its plans—widely seen as a lure to voters ahead of elections—and said the new measures would have to be assessed to determine whether they were in line with the country’s bailout commitments.
The incident was a sign of escalating tensions over the country’s bailout and put further pressure on Greece’s government, which is considering calling snap elections in 2017 as it grapples with slumping popularity and is losing hope of winning concessions on deeper debt relief or austerity from the eurozone and the IMF.
Athens and its creditors remain divided on key overhauls, including a revamp of the labor market, as well as on further austerity aimed at reaching the country’s primary surplus target—its budget balance excluding interest payments—from 2018 onward.
The situation has been further complicated by disagreements among Greece’s creditors over the level of the surplus that Greece must sustain and the economic overhauls it should undertake.
The IMF has pressed Europe to reduce Greece’s budget target to a primary surplus of 1.5% of gross domestic product, instead of the current goal of 3.5%. But European governments, led by Germany, are unwilling to agree, partly because Greece would then need even more debt relief.
The debt relief in question was agreed earlier this month by eurozone finance ministers, who endorsed a package of measures to be implemented in the short term that could ease the country’s debt load by around a fifth by 2060.