Brussels, 13/10/2015 (Agence Europe) - A reduction of the Greek debt “will not be credible unless it is accompanied” by “strong ownership of the programme” on the part of the Greek authorities and a strong determination to implement it, the President of the ECB, Mario Draghi, said on Tuesday 13 October in an interview with the Greek newspaper Kathimerini.
Following the first reduction of the debt by the institutional creditors in November 2012, the eurozone states had already said that they were prepared to do so again, on three conditions: that it is necessary, that Greece achieve a primary surplus, but also that Greece observe its commitments under the programme. A few months ago, the Wall Street Journal was the first to raise the possibility of linking the eurozone's gestures to reduce the debt to prior actions, in a repeat of the procedure applied for the payment of tranches of aid. The idea is reported to be doing the rounds and seems to have the support of all countries except the so-called 'hardliners'.
The sequence of events is already known. Discussions will start once the first monitoring mission of the creditors has been carried out, in other words towards the end of the autumn or early in the winter.
The need to reduce the burden of the debt also exists and is first and foremost political. As to how to do so, this has also been becoming clearer over the last few months. The Greek debt management agency seems to have been the first to stress the need to move away from thinking in terms of debt/GDP ratio, as this criterion is too reductive to apply to the Greek debt due to its specific characteristics (long maturity, low interest rates, etc.).
Speaking in Lima, where the G20 Finance was being held, the President of the Eurogroup, Jeroen Dijsselbloem, told the channel CNBC that the approach would be to see how Greece is able to service its debt and thus bear the burden of it on an annual basis. The viability analysis of the debt carried about by the institutions in July does not contradict this.
“There is a broad understanding about the method we should use, that is to look at the annual financing needs for the sovereign debt”, Dijsselbloem also explained in Lima, this time speaking to Reuters. “Second, there seems to be a broad understanding that a good standard would be to have the capital maximum (of these annual requirements of the debt: Ed) of 15% of GDP”, Dijsselbloem explained. This is precisely what the debt viability analysis of July said, on the basis of IMF criteria. According to Reuters, however, the IMF would like to limit this figure to 10% of GDP in the case of Greece. “My understanding is that the IMF always works on the 15% standard, but if they say that this is too high for Greece, then this is one of the issues we will have to discuss with them”, the Eurogroup President explained.
When the time comes, the institutions will submit projections to the Eurogroup, in terms of growth and other factors. “We will see if there are any financing peaks in the coming 30 years”, Dijsselbloem continued, still quoted by Reuters, explaining that according to the analyses of the European Stability Mechanism (ESM), the first peaks may occur within 15 years. “If that is the case, it would be strange to already try to tweak those - they are very far away”, he concluded.
However, a number of delegations still take the view that the question of a debt/GDP ratio remains important, because too high a debt could put off investors - an argument put forward by the IMF in the past. (Original version in French by Elodie Lamer)