Eurozone hails breakthrough on Greek debt

16_Eurozone hails breakthrough on Greek debt

(Australian Associated Press)

The eurozone has given Greece its firmest offer yet of debt relief in what finance ministers called a breakthrough deal that won a commitment from the IMF finally to return to taking part in the bailout for Athens.

After talks that lasted into the small hours of Wednesday, the Eurogroup ministers gave a nod to releasing 10.3 billion euros ($A15.98 billion) in new funds for Greece in recognition of painful fiscal reforms pushed through by Prime Minister Alexis Tsipras’s leftist-led coalition, subject to some final technical tweaks.

But a bigger step forwards was a deal by which the eurozone agreed to offer Athens debt relief in 2018 if that is necessary to meet agreed criteria on its payments burden.

That was enough to secure an agreement from the International Monetary Fund to again join the eurozone in funding the bailout of Greece.

“We achieved a major breakthrough on Greece which enables us to enter a new phase in the Greek financial assistance program,” Eurogroup president Jeroen Dijsselbloem, the Dutch finance minister, told a news conference.

“This is stretching what I thought would have been possible not so long ago.”

Acknowledging the “political capital” European ministers invested to reach the deal – a nod to strong German objections to debt relief – Dijsselbloem called it a “new phase” in a six-year drama to stabilise Greece’s finances that has taken the 16-year-old eurozone to the brink of break-up.

Mutual trust was returning to the talks, he said, nearly a year after Tsipras’s rejection of austerity measures brought Athens close to being pushed out of the euro.

“I think there is some ground for optimism that this can be the beginning of turning Greece’s vicious circle of recession-measures-recession into one where investors have a clear runway to invest in Greece,” Tsipras’s finance minister, Euclid Tsakalotos, told reporters as he left the Brussels meeting.

The IMF has long insisted on the European governments taking a hit to relieve Athens of some of its debt in order to make its public finances more sustainable.

The refusal of Germany and others to do that had led to months of wrangling with the IMF in which Athens had been something of a spectator in negotiations.

While the Europeans did not offer immediate debt relief, or make an unconditional promise of reducing the payments Greece must make to them, they did spell out criteria for it.

Athens’ gross financing needs to be kept below 15 per cent of GDP in the medium term and below 20 per cent beyond that.

The IMF’s European director Poul Thomsen said he believed the measures would “deliver the necessary debt relief”, though he cautioned that it was still up to the IMF board in Washington to determine whether to agree with his assessment. The extent of debt relief that would take place was still not clear, he said.

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