The pact has allowed the IMF to be open to join the third rescue

The pact has allowed the IMF to be open to join the third rescue

The eurozone today agreed to an expenditure of 10,300 million euros to help Greece to meet the payment of debt and outstanding bills, and detailed the short, medium and long term measures of debt relief, which has allowed the IMF Be open to join the third rescue .

After giving their political agreement to the completion of the first review of the rescue of up to 86,000 million euros, the ministers of Economy and Finance of the Eurozone decided that a first tranche of 7,500 million will be delivered to Greece in mid-June so that it can do against major repayments to the ECB and the IMF and catch up on arrears.

The remaining 2,800 million will be disbursed in several installments “after the summer,” according to the managing director of the eurozone’s rescue fund, Klaus Regling, who pointed out that any additional payment for debt service will be subject to compliance with milestones related to privatization, banking governance, the collection agency and the energy sector.

The general disbursement is also pending verification in the coming days of the full implementation of some previous actions, such as “corrections” to the legislation on the opening of the market for the sale of delinquent loans and pension reform, as well as to the completion of pending measures in the area of ​​privatization.

The closure of the first review was only part of a broader package that the Eurogroup had to agree on and whose second pillar includes the measures of Greek debt relief, essential for the IMF to join the third rescue.

The eurozone has not lowered the primary surplus target of 3.5% of GDP that Greece should reach in 2018, despite the fact that the IMF considered it unattainable without significant debt relief, but has agreed on measures that, in principle, convince at the bottom.

The Eurogroup considers that for Greek debt to be sustainable, gross financing needs must remain below 15% of GDP during the period after the third rescue, ie after July 2018, and below 20% thereafter.

Some of the short-term measures involve softening Greece’s debt payment profile by extending the average maturity of 28 years to 32 by the rescue fund. Interest rates, among other measures, will also be reduced with the fund’s financing strategy.

The medium-term measures will only be considered if a new analysis of the sustainability of the debt at the end of the rescue shows that they are necessary. The rescue fund would then use the benefits obtained by the ECB with the purchase of Greek debt in 2014 -1,800 million euros – which are in a segregated account, and the resumption of transfers of the benefits of the ECB and national banks to Greece from 2017 as a “cushion” to reduce future gross financing needs.

“Unused resources” could also be used, such as the 19,600 million euros that were not needed last year for the recapitalization of the bank, according to Regling. Asked if it will decide on the medium-term measures only after the German elections in 2017, the president of the Eurogroup, Jeroen Dijsselbloem, explained that “we have always said that it will be done when the rescue has been fully implemented and there is a new sustainability analysis Of the debt”.

For the long term, the Eurogroup has agreed on a contingency mechanism that could be activated after the end of the rescue to ensure the sustainability of the debt in the event of a “more adverse” scenario. All this has allowed the IMF to be willing to join the Greek rescue before the end of the year. “We welcome all parties have now recognized that the Greek debt is unsustainable and that Greece needs relief, and we also welcome that there has been an agreement on the methodology to assess the sustainability of the debt and on the objectives to be achieved by the relief” , said the head of the European Department of the Fund, Poul Thomsen.

The IMF said it had “made a significant concession,” since it had asked the eurozone to approve the measures, still not fully quantified, in advance and not after the program in 2018. “We have all shown flexibility and are willing to recommend to the This political agreement is upheld, as long as the revised analysis of debt sustainability suggests that the measures on the table provide the necessary relief.