BRUSSELS: Eurozone ministers yesterday reached a vital deal to unlock urgent cash for Greece but analysts warned promises to tackle the country’s debt mountain are sketchy, spelling trouble further down the road.
The agreement unlocks 10.3 billion euros (US$11.5 billion) in bailout cash that Greece needs to repay big loans to the European Central Bank and International Monetary Fund in July, having already fallen behind in making everyday government payments and wages.
The United States-based IMF has made easing Greece’s huge debt burden a condition for its continued participation in the bailout program, despite opposition from Germany to doing Athens any more favors.
The 19 ministers from the countries that use the euro met two days after Greek lawmakers passed yet another round of spending cuts and tax hikes demanded by its creditors.
Eurogroup chief and Dutch Finance Minister Jeroen Dijsselbloem called the deal, hammered out at late-night talks in Brussels, a “major breakthrough.”
The bailout rewards Athens for meeting the terms of its 86-billion-euro bailout program agreed last July.
Greece’s creditors will pay a first 7.5-billion-euro tranche next month and the rest in a series of later disbursements.
“The question of eurozone membership is off the table,” French Finance Minister Michel Sapin told a Cabinet meeting in Paris yesterday.
“The crisis between Greece and the eurozone is over.”
The hardest part of the talks was defusing the row between Greece’s creditors, the eurozone governments and the IMF, over the state of the Greek economy and debt relief.
“The Eurogroup agreed today on a package of debt measures which will be phased in progressively,” said Dijsselbloem.
“For the first time there’s a clear roadmap for debt relief,” said Greek government spokeswoman Olga Gerovassili.
But analysts, pointing to a lack of detail on such a deal, suspected negotiators simply postponed thorny discussions.
“In a spectacularly sophisticated show of kicking the can down the road, debt relief will be considered — later … With nothing so vulgar as amounts of money being discussed,” said UBS economist Paul Donovan.
One eurozone official candidly confirmed that this reading was accurate.
“Yes we did kick the can down the road,” he said.
The fund’s staff on the ground had trouble getting its management to agree to the compromise deal, a eurozone source said, “at one point” even failing to get IMF chief Christine Lagarde on the phone.
“On balance, the IMF had to make the largest concessions,” observed Tullia Bucco, an analyst at UniCredit.
In a brutal report on the eve of the Eurogroup meeting, the IMF warned that Greek public debt at the current level of about 180 percent of gross domestic product was unsustainable and must be reduced.
Athens welcomed the deal, with a government source saying it guaranteed “financing of the economy in favorable conditions and for a long time.”
