BRUSSELS – Greece’s international creditors are reportedly considering making debt relief for Athens conditional on reforms in a bid to keep a grip on the country’s economic policies after its bailout program finishes.
Several unidentified people involved in the discussions told The Wall Street Journal that the talks were ongoing. Prime Minister Antonis Samaras wants to restructure Greece’s deal with the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that has put up 240 billions euros ($327 billion) in two bailouts since 2010 to save the country’s economy.
The money came with attached harsh austerity measures and the country’s major opposition Coalition of the Radical Left (SYRIZA) party has called for a revision of the loan terms or even reneging on what it owes. Samaras, however, is looking for a longer time to repay, lower interest or other less severe methods to cut what Greece owes.
German Chancellor Angela Merkel, whose country is putting up much of the money, has ruled out a so-called “haircut” in which Greeece would be allowed to walk away from much of what it owes, which would force the taxpayers in the other 17 Eurozone countries to pay for generations of wild overspending by Samaras’ New Democracy Conservatives and his coalition partner, the PASOK Socialists.
How to ease Greece’s debt – which stands at €320 billion ($434 billion), or roughly 174% of Gross Domestic Product -is vexing the country’s creditors. A previous government stiffed private investors with 74 percent losses two years ago but it did almost nothing to ease the debt.
The Troika, pushing Greece to stick to reforms, wants the debt cut to 124% of GDP by 2020 and “substantially below” 110% of GDP by 2022, although officials have said both goals seem far-fetched.
As of March 2013, some 66% of Greece’s debt stock is held by Eurozone governments and the IMF, which scrambled to stop the country from defaulting in 2010 and have been financing it ever since.
The Eurozone’s contribution to the bailout officially runs out at the end of this year, while the smaller IMF component will continue being disbursed until March 2016, leaving Greece at the mercy of the markets.
The government earlier this year showed a 1.5 billion euro ($2.02 billion) primary surplus and successfully floated its first sovereign bond in four years, at 3 billion euros for five years, an indicator Greece is recovering, Samaras said, although he still wants debt relief.