Extra Debt Relief for Greece: Eurozone Reviews Macro Reforms

Written by | Thursday, May 12th, 2016

Eurozone finance ministers gathered on Monday (9 May) to discuss the state of the first review of Greece’s macroeconomic performance and adjustment program. At an extraordinary meeting held in Brussels, ministers embraced the new package of policy reforms from Greece, some of which were legislated in vote on Sunday (8 May) by the Greek Parliament. The new package covered a variety of topics, such as the pension system, reform of VAT and income tax, measures on the public sector wage bill, the country’s privatization strategy as well as the issue of non-performing loans.

Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici, used the occasion of Europe Day, the anniversary of the founding of the European Union, and referred to the words of EU founder Robert Schuman – that Europe would be built in small steps – to describe Greece’s progress to overcome its debt and build a stronger economy. Moreover, Mr Moscovici praised the Greek parliamentary vote, saying the measures on pensions and income tax would have a permanent budgetary impact of around 2 per cent of Greek GDP.

The head of the group of finance ministers, the so-called Eurogroup, Jeroen Dijsselbloem, commented that the agreement is the next step towards the successful completion of the first review of the program. Mr Dijsselbloem said that the group did not make any final decisions and added that “of course any measures will be conditional upon full implementation of the measures agreed in the program and will be considered later on”.

The Eurogroup also concluded that Greece would be granted debt relief by giving it longer grace periods and bond maturities from 2018, if Athens delivers by then on all reforms agreed upon under its latest bailout. The offer should be finalized in detail by 24 May and it is generally seen as a compromise between Germany, which does not think additional debt relief is necessary, and the International Monetary Fund (IMF), which insists that it is necessary. The involvement of the IMF in the Greek bailout is, however, essential for political reasons for many Eurozone countries, including Germany.

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