By JAMES KANTERMAY 24, 2016
The New York Times
BRUSSELS — Fearing a renewed crisis in Greece that could set off economic shock waves, policy makers across three continents have scrambled to strike a deal to ease the country’s debt burden. There have been meetings in the United States, a diplomatic blitz in Europe and talks in Japan.
In an agreement announced early Wednesday, Greece won additional pledges of debt relief, but nothing substantial until 2018 at the earliest, and only then if it continues to carry out painful reforms. Even so, the accord could help ease concerns about another flare-up of a crisis in Greece as the region deals with a mass influx of migrants and a continuing terrorist threat.
Eurozone finance ministers also gave a green light for the next round of aid for Greece, money that would allow the country to pay bills in the coming months. Further final approvals for those disbursements will be needed, but ministers allocated 10.3 billion euros, or about $11.5 billion, for Greece, to be distributed in several stages starting with €7.5 billion as soon as the second half of June.
The plan for debt relief may also tamp down tensions ahead of the vote in Britain on June 23 over whether to leave the European Union.
After weeks of frenzied diplomacy, the marathon talks that began Tuesday afternoon and ended early Wednesday appeared to bridge some important differences. Officials sought to show they could ease squabbles among Greece’s creditors over the specifics of debt relief and the state of the country’s economy that have left the International Monetary Fund and Germany lined up on opposite sides.
The I.M.F. has painted a dark picture, insisting that Greece cannot meet its budget goals. It has outlined particular demands on the cost and timing of the debt payments. Although the discussion Tuesday night on debt relief looked as if it could be enough to bring the I.M.F. into the bailout, officials signaled that hurdles remain.
The European heavyweight in the bailout, Germany, has a more upbeat outlook and remains profoundly skeptical of cutting Athens more slack. Some economists warn that Greek politics are unstable, and that a new government might not be prepared to make alterations later in exchange for debt relief now.
“The fund needs to stick by rules. It can’t fund countries with unmanageable debt loads if it wants to remain part of the world’s most high-profile bailout,” said Mujtaba Rahman, the Europe director for the Eurasia Group, a political risk consultancy. “The Germans need to prove their medicine of austerity and bailouts still works.”
The two sides did find some common ground.
The I.M.F. “made a major concession,” Poul M. Thomsen, the director of the fund’s European department, told a news conference Wednesday morning. “We had argued that these debt relief measures should be approved upfront, and we have agreed that they will be approved at the end of the program period.”
Mr. Thomsen said the steps taken by Greece and the debt-relief plans outlined by European lenders should “form the basis for I.M.F. support.” But he also emphasized that the I.M.F. would have to carry out another analysis of the Greek economy before joining the bailout.
In recent days, European officials have also been discussing a debt swap that would help Greece. That proposal calls for Europe to buy a portion of the I.M.F.’s loans to Greece and then allow Greece to borrow more money at a lower rate.
Asked about those plans, Mr. Thomsen said there was “no concrete proposal” for such a buyout, but he suggested that such a step would be helpful.
This type of deal could help appease the I.M.F. because it would effectively cut Greece’s debt costs. It could also mollify Germany, where lawmakers want assurances that the fund will be comfortable participating in the bailout.
How much of a dent the plans will put in Greece’s debt after three bailouts in six years was unclear on Wednesday morning. The country has more than €300 billion in debt, amounting to roughly 180 percent of its gross domestic product.
Greece was promised debt relief last summer under the terms of a bailout of €86 billion. The I.M.F. has said it will not contribute to the rescue effort until Greece’s debt load is addressed.
Yet the Germans have largely blocked debt relief. Last month, the German finance minister, Wolfgang Schäuble, insisted at I.M.F. meetings in Washington that it was “not necessary,” saying it would distract Greece from taking steps to transform its economy.
With Germany and the I.M.F. at an impasse, Jeroen Dijsselbloem, the Dutch politician who leads the Eurogroup, sought to broker a compromise in recent weeks. From his country home in Wageningen, the Netherlands, Mr. Dijsselbloem spent most of the first week of May drafting a three-stage plan, according to two people briefed on the matter who spoke on the condition of anonymity.
In the short term, Athens would get money to reduce its debt, and payment terms would be adjusted at the margins. In the medium term, Greece would get longer grace and payment periods. And in the long term, there could be more far-reaching, though unspecified, measures.
But the proposal hit an obstacle when eurozone finance ministers convened in Brussels this month.
Mr. Dijsselbloem’s short-term plan, according to the two people briefed on the proposal, called for allowing Greece to tap profits on its bonds that were made by the European Central Bank and eurozone central banks. The bonds, bought at fire-sale prices in the depths of the crisis, have since gone up in value, and the profits would give Greece a bit more leeway in the next couple of years.
But Mr. Schäuble suggested it would be difficult to get German lawmakers to approve the move, and pushed to make the transfer an option only after 2018, the two people said.
The Dutch official redrafted the plan, and the finance ministers reached a consensus that they put to the I.M.F. A few days later, the I.M.F. raised the stakes, recommending that Greece’s interest payments to the eurozone be fixed at 1.5 percent for up to 40 years.
With the I.M.F. and Germany sticking firm, the situation set off a flurry of back-room diplomacy ahead of the meeting of the Group of 7 industrial nations in Japan.
Over the weekend, Treasury Secretary Jacob J. Lew of the United States urged Mr. Schäuble to put Greece’s debt on a sustainable path through “meaningful debt relief.” Like the I.M.F., the United States has leaned hard on Germany to give easier terms to Athens to help preserve stability in the Europe.
Referring to the short-term aspect of the debt relief plans that emerged Wednesday morning, Mr. Dijsselbloem told the news conference that “it’s difficult now” to say “what in economic terms the impact of that will be.”
But Mr. Dijsselbloem suggested that the debt relief measures starting in 2018 could be far-reaching, and in a statement, the Eurogroup outlined those so-called medium-term plans in much greater detail than earlier in the month.
“Some may say — I have heard it twice now — that the package is not ambitious,” Mr. Dijsselbloem also told the news conference. But “what the Eurogroup has put on the table here” for short-term and medium-term debt relief “is something that a month ago I couldn’t have dreamed of that the ministers would have agreed to,” he said.
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