EU, IMF mull Greek debt relief; no talks on bailout extension

WASHINGTON (Reuters) - The euro zone and International Monetary Fund are discussing options for future debt relief for Greece at meetings this week in Washington, but are not considering any extensions of the Greek bailout, top euro zone officials said on Thursday.

FILE PHOTO: Eurogroup President Mario Centeno speaks during a panel entitled "Reforming the Euro Area: Views from Inside and Outside of Europe" during IMF spring meetings in Washington, U.S., April 19, 2018. REUTERS/Aaron P. Bernstein

“There are no talks of such things as an extension of the Greek program. The Greek authorities are very much focused on the exit from the program and finalizing this by August,” said Mario Centeno, the chairman of euro zone finance ministers.

“There are still decisions to take on the continuation of this process, but those are framed around the debt mechanisms ... for the medium and the longer term and around the typical surveillance that Portugal, Ireland and other program countries also had,” he told a seminar at the Atlantic Council on the sidelines of the International Monetary Fund and World Bank spring meetings.

Centeno was responding to media speculation that Greece could get a special credit line from the euro zone bailout fund after it exits the program on Aug. 20 to be less dependent on market sentiment, but which would also come with conditions.

Greece does not want such a credit line because of the conditions. Throwing off the formal control of the euro zone would be perceived as a key political achievement for the left-wing government of Prime Minister Alexis Tsipras.

Neither Ireland, nor Portugal, Spain or Cyprus, which all received euro zone bailouts in the past, decided to ask for such a precautionary credit line, opting for what is called in EU jargon a “clean exit.”

Yet the EU’s Economic Commissioner Pierre Moscovici said earlier on Thursday that Greece needed a new arrangement with its euro zone creditors to make sure that reforms continue to be implemented and budget discipline was maintained.

But he made clear that could not be some new bailout in disguise.

Greece has borrowed more than 200 billion euros from euro zone governments in three consecutive bailouts since 2010 and some lenders are concerned Athens may not repay the loans over the next decades or reverse already implemented reforms and get itself into economic trouble again.

“We will need to agree a post-program arrangement that supports the continued implementation in the coming years of the adopted reforms, as well as the pursuit of sound fiscal policies – but which is not a new program in disguise,” Moscovici said in a speech at the Peterson Institute of International Affairs in Washington.

After Greece exits its bailout it will regain full sovereignty in fiscal policy-making, submitting only to less detailed creditor scrutiny in what is called post-program surveillance. It is now subject to quarterly reviews that it has to pass to get new loans.

But many euro zone countries are concerned less stringent scrutiny will not be enough to keep Greek politicians from pushing for looser fiscal policies.


To make sure Greece does not veer off the reform track in the years to come, its creditors are considering linking additional debt relief to sound economic policies and to the pace of the country’s economic growth.

The various debt relief options under discussion include the transfer of profits from maturing Greek bonds held by national central banks back to Athens, or replacing more costly IMF loans with cheaper euro zone loans.

There are also options of extending maturities of euro zone loans and grace periods for repayment. Such relief could be made conditional on sound economic policies and keep the country under some form of euro zone economic control for years to come.

Adding to the pressure to accept some degree of continued control, euro zone officials have pointed out to Athens that if it makes a “clean exit”, Greek banks would no longer be allowed to use Greek debt as collateral in ECB open market operations because the paper is not investment grade.

The banks are now allowed to use Greek bonds as such collateral on the basis of a special waiver which would remain in place if Athens decides to ask for a precautionary credit line from the euro zone bailout fund.

Officials said that while discussions on various options for Greek debt relief would continue in Washington this week to establish the “red lines” for Germany and for the IMF, no conclusions are likely until in June.

“In Washington, there will be no decision made on any of this,” one official said.

Reporting by Balazs Koranyi and Jan Strupczewski; Editing by Paul Simao