World Economy

EU Sets June Deadline for Greece Debt Deal

Pierre Moscovici (L) talks to reporters at the National Palace of Culture in Sofia,  as Mario Centeno looks on.Pierre Moscovici (L) talks to reporters at the National Palace of Culture in Sofia,  as Mario Centeno looks on.

Eurozone finance ministers in Sofia, Bulgaria, on Friday set a two-month countdown to agree Greece’s high-wire exit from eight years of bailout programs with divisions deep over how much debt relief Athens needs.

Mario Centeno, the head of the Eurogroup, said reform efforts were still required from Greece before it could end its massive rescue program as expected on August 20, Reuters reported.

Greece has been at the mercy of three bailout programs since 2010 when its public finances collapsed, pushing the country into a deep economic depression and bringing crisis to the eurozone.

Athens has yet to rubberstamp its last reforms, including a round of controversial privatizations, with eurozone ministers demanding full delivery ahead of ministerial talks in Luxembourg on June 21.

“On the basis of a successful review, the eurogroup will decide in June all the elements that can help facilitate the exit of Greece from the program by August,” said Centeno, who is also Portuguese finance mister.

Ministers meeting in Sofia did not get down to the thorny issue of debt relief, but EU Economic Affairs Commissioner Pierre Moscovici said “we of course need to reach an agreement on a strong set of commitments to ease Greece’s debt burden.”

The topic of debt relief is hugely sensitive with Greece’s debt to European taxpayers standing at nearly 180% of annual output, a level that many fear is unsustainable.

But powerful Germany, Greece’s biggest creditor, is extremely reluctant to pare down the pile and will demand that Greece meet strict targets even after the bailout as a condition.

Opposite the hardliners, which also includes the Netherlands and other northern eurozone countries, are France and the European Central Bank, which argue that reduced debt is crucial in order for Greece to gain the trust of the markets.

France has proposed that debt relief be tied to economic growth, where Greece would see its debt rates automatically reduced in tough times and set higher in the good ones.

“The more automatic they can be, the less conditional they can be, the more they can contribute to the confidence building exercise (for investors),” ECB board member Benoit Coeure told a news conference in Sofia.

Whichever option is finally chosen, Athens, which has pledged to implement reforms even after it has left the aid program, will be monitored very closely in order to avert yet another rescue.

 “The next two months will be very intense,” said Klaus Regling, the eurozone’s rescue fund chief.

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