Euro zone finance ministers agreed on Monday,December 5, to grant Greece short-term debt relief measures that would reduce the amount of the country’s public debt by 20 percentage points of GDP by 2060.
Speaking after a meeting of euro zone finance ministers, the head of the euro zone’s ESM bailout fund Klaus Reglingtold a joint press conference with Eurogroup President Jeroen Dijsselbloem and EU Commissioner for Economic and Financial Affairs Pierre Moscovici that the short-term measures will start being implemented gradually in the coming weeks.
As the Eurogroup statement for Greece underlines “The short-term debt measures will have a significant positive impact on the sustainability of Greek debt.” The IMF staff has reconfirmed its intention to recommend to the Fund’s Executive Board a new financing arrangement for Greece as soon as possible, once staff-level agreement was reached, in accordance with established Fund policies.
According to Wall Street Journal the most effective measures would lock the interest rate Greece pays on some current and future loans, shielding the country from paying higher interest rates in future. The measures range from exchanging floating-rate bonds held by Greek banks as part of the country’s bank recapitalization for fixed-rate ones, to using interest-rate swaps to fix Greece payments on some European Stability Mechanism loans. They also include making some future disbursements to Greece in fixed-rate loans.
The short-term measures on debt relief for Greece will be implemented immediately and are more ambitious than initially expected, Finance Minister Euclid Tsakalotos said on Monday after the end of the Eurogroup. “Talks for the achievement of a staff-level agreement will continue. The framework in which they will continue is that Greece is returning to growth, as we have positive growth rates in the second trimester and we expect the same in the third. With this we expect we will have an overall positive effect,” he said. Further on, he warned creditors that “There should be no demands on Greece that do not take into account … the current political and social situation”.
The debt relief is welcome but not enough to set the Greek economy on growth track, main opposition New Democracy (ND) leader Kyriakos Mitsotakis said onTuesday. “Today more than ever the country needs a national development plan. A plan that will boost Greek productivity. A plan that will attract investments and create well paid job positions,” he underlined.
“The Eurogroup decision on short-term measures is an important success and a decisive step to stabilize the Greek economy and restore confidence,” Government spokesman Dimitris Tzanakopoulos said ina press briefing on Tuesday, December 6.Tzanakopoulos announced that the government and the prime minister will take initiatives to conclude the programme review without new measures and with the restoration of the labour relations model. As he said, the prime minister will contact EU officials in order to explain the Greek positions on open issues of the negotiation.