By Thanos Tsiros
The Greek government is expected to officially submit its request for debt relief during Monday’s crucial Eurogroup meeting in Brussels, less than 24 hours after passing another round of austerity measures via a slim Parliament majority.
The Tsipras government wants to present Eurozone partners, and the IMF, with the legislated tax hikes and pension reforms that fulfill two-thirds of the 5.4-billion-euro package of measures aimed at meeting memorandum-mandated fiscal targets through 2018.
According to reports, the Greek government, which has long relished the prospect of officially discussing debt relief at an institutional venue, wants debts owed to institutional creditors switched from variable interest rates to fixed lower rates, as well as an extension of the repayment period – even up to 70 years.
The very prospect of discussion on debt relief is considered as imperative by the Tsipras government in order to deflect shrill political criticism and economic uncertainty again plaguing the country. The latest austerity measures recorded a retreat from a previous government promise to keep the tax-free annual income ceiling at 9,000 euros and back-tracking on the issue of non-performing loans. Creditors have long pushed for a liberalization in the NPLs framework to allow the resale of "bad loans" on the secondary market to distress and other investment funds, given that all types of NPLs in the country have now reached an Olympus-sized mountain of debt (now exceeding 100 billion euros) that is asphyxiating the domestic credit sector.
European creditors, especially the German side, nevertheless have been weary of even considering debt relief, whereas the IMF is pressing for an immediate reduction of Greece’s sovereign debt in order to ensure the latter’s sustainability, which in turn would meet the Fund’s own rules for loaning to countries.
As in previous such impasses dealing with the Greek issue, a Commission compromise foresees more time for negotiations on both debt relief and a 3.6-billion-euro “contingency package” of measures demanded by the IMF. The Fund wants more projected spending cuts to meet fiscal targets through 2018. The Commission proposal was reported by Bloomberg over the weekend.
According to the wire service, the compromise would guarantee the next loan tranche to Greece with the simultaneous Parliament approval of the next austerity bill, which would legislate the framework for NPLs, increase indirect taxes and refer to a “temporary” solution for the contingency package, a prospect extending for a few months.
Athens desperately wants talks on debt relief to begin but wants to avoid tabling the 3.6-billion-euro contingency package in Parliament or even detailing what measures will be automatically taken if fiscal goals, namely, primary budget surplus figures, aren’t met.
