Meeting in Brussels on Monday 22 May in Eurogroup format, the finance ministers of the Eurozone and the head of the Europe department of the International Monetary Fund, Poul Thomsen, failed to agree on measures to relieve the Greek debt, thereby blocking any finalisation process for the second monitoring mission. Discussions have been shelved until the Eurogroup of 15 June.
Debt relief as stumbling block
The main sticking point in finalising the mission still relates to the matter of Greek debt relief. “At this stage, we have not concluded an agreement on this point”, said Jeroen Dijsselbloem, President of the Eurogroup, at a press conference following the meeting between the parties. The major financial decision-makers of the Eurozone did, however, acknowledge that concrete discussions had been carried out, of a technical nature and which had never been so “detailed or in-depth”, according to the Commissioner for Economic and Financial Affairs, Pierre Moscovici, who also attended the meeting.
The debt question was already the main bone of contention before this Eurogroup meeting, as the IMF is making its participation in the bailout plan conditional on the viability of the Greek debt and, therefore, its relief (see EUROPE 11793). The German government, however, seems much less inclined to agree to this principle, a few months ahead of its general elections.
Although the Eurogroup President reiterated upon his arrival that the final decision on the debt relief measures would not be made at this meeting, but rather when the aid programme comes to an end in 2018, a political agreement in principle was expected.
According to one European source, some progress was offered to the IMF at this Eurogroup. The German authorities reportedly conceded certain points, for instance extending the debt maturities, but these points would still not appear to be enough for the IMF to agree to come on board the bailout plan.
As the IMF was not disposed to participate on the basis of this proposed agreement, the Greek government chose not to sign a partial agreement that did not include the financial institution.
An agreement on the budgetary trajectory up to 2022
Although it was not possible to resolve the matter of the sustainability of the debt at this latest meeting between Eurozone finance ministers and the IMF, the same cannot be said of the budgetary trajectory, at least up to 2022.
The various parties agreed on maintaining a primary budgetary surplus (not including servicing the debt) of +3.5% of GDP up to 2022. This is a little higher than previously anticipated (see EUROPE 11773) by Greece and the ‘institutions’ (European Commission, IMF, ESM, ECB), but it is a further concession on the part of the German government, which would have ideally liked a longer period.
However, Moscovici and Dijsselbloem declined to give details about the post-2022 period, not clarifying the level in percentage terms at which this primary budgetary surplus would be set.
Partners welcome Greek reforms
Although it seems hard to talk about grounds for satisfaction, as the various parties had very much hoped to reach an agreement at this meeting, all of Greece’s partners welcomed the latest economic and social reforms adopted by the government of Alexis Tsipras. Moscovici announced that around 115 of the 140 legislative and non-legislative social measures asked of the Greek state (see EUROPE 11779) had already been adopted, going on to state that the Hellenic Republic was on the right track. Dijsselbloem also stressed that the IMF had taken note of and welcomed the latest reforms.
It would, therefore, seems surprising that the parties are not headed for agreement in the coming weeks, as the Greeks have “taken their responsibilities”, as Moscovici put it upon his arrival at the Eurogroup. Bruno Le Maire, who was attending his first Eurogroup as French minister for the economy, took pains to reassure his audience at the press conference. “The concrete measures taken by the Greek government will make it possible to disburse the necessary sums within deadline”, he said. “We are very impressed by the work done in Greece on the reforms agreed”, Dijsselbloem added.
More talks in the coming weeks
The various protagonists around the negotiating table have decided to meet again to discuss the questions left outstanding at the next Eurogroup, to be held in Luxembourg on 15 June. Everybody hopes that the IMF will agree to come on board the bailout plan, which will also give the Greek state access to the ‘quantitative easing’ programme, which will help to contain the interest rates on the Greek debt and make it easier for Greece to return to the medium- and long-term debt markets. However, although the presence of the Washington-based institution seems likely, the above European source feels that its decision not to take part in the bailout plan cannot be ruled out.
It would furthermore appear that discussions could take place at the forthcoming G7, to be held on 26 and 27 May in Taormina (Italy), and to be attended, amongst others, by Emmanuel Macron, Angela Merkel, Donald Tusk and Jean-Claude Juncker. “Everybody hopes to reach an agreement within three weeks”, Euclid Tsakalotos, the Greek finance minister, said on leaving the meeting.
Readers may recall that the finalisation of the second monitoring mission of the third Greek bailout plan will unlock a further tranche of aid, allowing the Greek authorities to face a reimbursement peak of more than €7 billion to the ECB. (Original version in French by Lucas Tripoteau)