News Column

Greece seeks to open debt relief talks with creditors

May 5, 2014

Helena Smith Athens



In a step likely to be hailed as further proof of Europe's receding economic crisis, Greece is poised to formally open debt relief talks with its creditors.

The Greek finance minister, Yannis Stournaras, will raise the once off-limits topic with his eurozone counterparts in Brussels today, four years after Athens received its first slice of international aid.

Stournaras confirmed speculation that Greece would propose measures to alleviate its monumental debt burden, which at 175% of GDP is by far the highest in the EU, despite private-sector creditors having agreed barely two years ago to massive losses on their holdings as part of a second bailout for the country.

Economic recovery is thought to be impossible without the burden being lowered to more sustainable levels, and options could include extending repayments from 30 years to as much as 50, according to insiders.

"In the context of presenting a new growth model for Greece in the next 10 years . . . I will talk of the need to look at ways of reducing debt further," Stournaras said. "I will remind my colleagues of the decision that was made in November 2012 to begin such talks if Greece achieved a primary surplus."

The European commission recently said that Greece had achieved a primary budget surplus - before interest payments on its debt - of euros 1.5bn (pounds 1.2bn) in 2013.

"What we need is to reduce our annual financial needs," said Stournaras, referring to the euros 6bn in interest payments Greece must meet to service the debt. "We don't want to inflict losses on our partners - we want a mutually beneficial solution."

With European governments now holding most of the debt, the prospect of a restructuring that would hit the finances of member states directly has been ruled out.

Germany, which has put up the vast majority of the euros 240bnAthens has received in rescue funds, is especially "allergic" to suggestions of a further haircut that would affect taxpayers, Greek officials say.

"Extension of maturities and reduction in interest rates are among the proposals," said Stournaras, refusing to be drawn on specifics. "But these are just scenarios . . . it will be a long discussion. "

Even if the country's debt burden is made more manageable, economic analysts argue that Athens's economic woes are far from over given the record levels of unemployment and poverty that have followed the gruelling fiscal adjustment exacted as the price of aid.

Greeks exports have dropped precipitously in the last year and the nation's economic output has shrunk by more than a quarter since the start of the crisis.

Finance minister Yannis Stournaras said Greece would seek a 'mutually beneficial solution' with its creditors



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Source: Guardian (UK)


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