Brussels, 22/01/2016 (Agence Europe) - The head of Eurogroup, Dutch national Jeroen Dijsselbloem, feels that one option for a debt relief agreement between Athens and its international lenders would be a mutual promise.
“One (option) is that we simply promise each other. They promise to their European partners to maintain the primary surplus, in other words to run a good budget. And we promise that we stand ready to smooth out these peaks (in the debt repayment timeline, Ed.) in the future,” said Dijsselbloem at an interview in Davos with the Wall Street Journal, published on Friday 22 January.
The European Commission pointed out the same day that talks would begin when the first follow-up mission of the lenders' representatives in Athens comes to an end. At the same time, the Commission repeated that a cut in the debt would not take place.
Eurogroup has adopted an argument first mooted by the Greek debt management agency, which is reported to stress the unique nature of the eurozone, namely average loan maturity, low cost of debt servicing, high concentration of debt in the public sector, and so on. It says metrics such as the debt/GDP ratio do not do justice to such characteristics. One of the recent joint Commission-IMF analyses of debt viability notes that in order for a debt to be viable, a country's gross financing needs must remain below 15% of GDP.
Such a promise “would actually be a sensible solution, because the first peak is in 10 or 15 years' time and it's very hard to predict how sizable it will be. The magnitude of debt relief will depend on how much Greece's economy grows in the coming years,” said Dijsselbloem. An alternative would be to try to calculate right now which measures will be needed and to take immediate action, explained the Eurogroup head.
In a press release issued on Thursday 21 January, the IMF called again for “significant debt relief.” It has made reform in Greece and a reduction in the Greek debt a precondition for its involvement in the third bailout. The IMF fears that huge debt would scare off investors. Some eurozone delegations, the French for example, share this fear. (Original version in French by Elodie Lamer)