BRUSSELS – A decision on whether crisis-stricken Greece gets more financial assistance or debt relief won’t be made until “after the summer,” a top eurozone official said Monday.
Dutch Finance Minister Jeroen Dijsselbloem, who also chairs the meetings of the eurozone’s 18 finance ministers, said Greece’s debt burden “has to be reduced; the question is who does it and how to do it.”
He insisted, however, that there’s no urgent need to make a decision as Greece’s current 240 billion-euro ($330 billion) bailout program provides enough financing through August — provided the country meets its fiscal and reform targets.
Dijsselbloem’s remarks put an end to speculation that Greece’s international creditors — the International Monetary Fund, the European Commission and the European Central Bank — might agree to some form of debt relief before European Parliament elections in May to boost the country’s governing pro-reform camp.
EU officials have been vague about what additional aid Greece may get — the carrot of more help has been dangled if Greece met certain budget targets, which it is close to doing.
They have hinted at providing another, albeit smaller bailout, but also at lowering the interest rates Greece pays on loans and further extending the time the debts have to be repaid.
However, many analysts say Greece can only return to sustainable growth if its creditors agree to write off some of their loans. That may be a step too far for some governments given the potential fallout at the ballot box.
Greece has been at odds since September with its creditors. Though the country has made great strides in getting its public finances into shape over the past few years, there are concerns that it’s dragging its feet on agreed fiscal targets and structural reforms, such as overhauling its labour market, and privatizing state assets.
In a potentially positive development for Greece, the so-called troika of creditors, said Monday its team of inspectors will return to Athens by the end of the week. Their return and approval of Greece’s reforms is a necessary precondition for the disbursement of the next batch of Greece’s bailout loans. Athens needs to get its hands on the cash by May to service a debt repayment of around 10 billion euros.
“There is progress but there’s no guarantee of a positive outcome,” cautioned Dijsselbloem, adding that much remained to be done despite recent “remarkable progress.”
Since 2010, Greece has been relying on official rescue loans as the impact of the financial crisis laid bare the scale of the country’s budget mismanagement. In return, successive governments have had to slash salaries and pensions, raise taxes and sell off assets to reduce debt and make the economy competitive.
“There is still plenty of hard work to do,” Olli Rehn, the EU’s top economic official, said in Brussels. “It is important that the country intensifies economic reforms.”
Greece’s private creditors have already taken a hit on their holdings, but the country’s debt level is still considered to be unsustainably high at about 175 per cent of its economic output.
The country is still struggling through a six-year recession, while unemployment has risen to about 28 per cent.
Disillusion remains a feature of Greek public life after years of crisis. On Monday, the country’s civil servants union announced plans to hold two 48-hour strikes this month and next to protest planned layoffs and closures of government-run agencies considered unproductive.
Derek Gatopoulos in Athens contributed reporting.
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