Greece creditors agree on debt relief in bailout exit

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Europe

Euro zone finance ministers earlier on Friday offered Greece a 10-year deferral and maturities extension on a large part of past loans as well as 15 billion euros (17.5 billion US dollars) in new credit to help Athens stand on its own feet after it exits its third bailout in August.

With writing-off loans off the table, eurozone ministers agreed to extend maturities by 10 years on major parts of its total debt obligations, a mountain that has reached 180 percent of GDP – almost double the country's annual economic output.

Greece is slated to leave its financial rescue on August 20 and finance ministers from the 19 countries that use the single currency were under pressure to offer Athens a goodbye deal that left it strong in the eyes of the financial markets.

“The additional debt relief measures announced today will mitigate Greece medium-term financing risks and improve medium term debt prospects,” the International Monetary Fund’s managing director Christine Lagarde told a news conference.

Christine Lagarde, managing director of the IMF, speaks during a news conference in Washington, DC, US, June 14, 2018. /VCG Photo

The agreement is an important turning point for the eurozone nearly a decade after Greece stunned the world with out-of-control spending and sparked three bailouts and a near collapse of the euro single currency.

The deal was expected to be an easy one, but last-minute resistance by Germany – Greece's biggest creditor – on debt relief dragged the talks on for six hours.

Greece's latest 86-billion-euro program was agreed in 2015 after six contentious months of negotiation, bringing the level of assistance received by Athens to 273.7 billion euros (317.62 billion US dollars) since 2010.

The rescue loans came in return for hundreds of stringent reforms that landed like a rock on a Greek economy, which shrank by nearly 25 percent in just a few years and sent unemployment surging.

Greece however will remain under the watch of its creditors after the bailout and under stricter terms than for Portugal, Ireland and Cyprus following their respective bailouts.

Under German demands, Greece's debt relief in the short-term will be conditional on the continued implementation of agreed reforms, which if successful could inject about one billion euros to the government's underfunded budget every year.

"We will ensure that the pressure to implement further reforms remains strong in the medium and long term," said Austrian Finance Minister Hartwig Loger.

Source(s): AFP ,Reuters