By Jan Strupczewski and Francesco Guarascio
LUXEMBOURG Euro zone lenders agreed on Thursday to lend 8.5 billion euros ($9.5 billion) to Greece, pulling the country from the brink of default, and gave some details on possible debt relief in 2018 as the International Monetary Fund agreed to join the bailout.The decision was taken at a meeting of euro zone finance ministers in Luxembourg, attended by IMF Managing Director Christine Lagarde, after Greece completed all reforms requested by the creditors at this stage of the bailout program. The head of the euro zone bailout fund Klaus Regling told a news conference after the ministers' meeting that the disbursement of the money would take place in two tranches.The first would amount to 7.7 billion euros and come in early July to cover the repayment of 6.9 billion euros worth of maturing Greek debt and 0.8 billion of arrears.A further 0.8 billion euros would be disbursed "after the summer", Regling said.The IMF would join the Greek bailout, Lagarde told the news conference, offering Athens a standby arrangement of less than $2 billion, the length of which will be tailored to match the end of the euro zone bailout in mid-2018.The fund would not, however, disburse any of its money to Greece until the euro zone provides enough details on possible debt relief for Athens in 2018 that would allow the Fund to calculate whether Greek debt can be made sustainable.But the standby arrangement would buy the euro zone, Greece and the IMF time to work out the details of the debt relief that is to come in 2018, Lagarde said. She said the deal on Thursday was the second-best solution to a full debt deal.
To accommodate the IMF's need for more specifics on debt relief, the euro zone finance ministers said in a statement that in 2018 they would be ready to consider extending the maturities and grace periods of their loans to Greece by a range from zero to 15 years. The average maturity now is 30 years.But they did not go any further than that and the IMF said it was not enough to calculate Greek debt sustainability.Debt relief talk has been a hard sell in Germany, the biggest contributor to the Greek bailouts, which faces elections in September and does not want to anger its bailout-weary voters with discussions of relief for Athens. Berlin also wants to retain leverage over Greece to make sure reforms remaining under the bailout are implemented.
The euro zone has been reluctant to commit to concrete debt relief numbers now because it argues that if Greece does all that is required of it and keeps a high primary surplus - the budget before debt servicing costs - for decades, it may not need any debt relief at all.But the IMF says euro zone's assumptions on Greek economic growth and the country's ability to keep a high primary surplus are unrealistic and that Athens clearly needs debt relief to win back investor confidence and return to market financing.To bridge the wide differences in assumptions on Greek growth for the next decades, France proposed to link the size of the debt relief with Greek economic growth and euro zone ministers said they would work on that idea further.
They said in their statement that the exact mechanism of how to link debt relief to growth would be worked on as of 2018 by deputy finance ministers and treasury officials and be announced after the bailout ends, together with the whole debt deal.Pressure is mounting at home on left-wing Greek Prime Minister Alexis Tsipras from a public weary of austerity.Greece says it has done its part after legislating further pension cuts and tax hikes demanded by lenders to convince the IMF to participate. "Greece has fulfilled its commitments and adopted the required reforms. Now it is time for the Europeans to comply with their commitments on debt relief," Greek President Prokopis Pavlopoulos said in an interview with German daily Handelsblatt.In Athens, some 1,500 pensioners gathered to protest against more than a dozen rounds of pension cuts since bailout-induced austerity was enforced seven years ago.($1 = 0.8969 euros) (Writing by Jan Strupczewski and Phil Blenkinsop; Editing by Alastair Macdonald)
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Updated Date: Jun 15, 2017 21:07 PM