Greek crisis deemed ‘over’ thanks to EU debt relief deal

By Francesco Guarascio and Renee Maltezou

Eurozone finance ministers have extended maturities and deferred interest of a major part of their loans to Greece, along with a big cash injection, to ensure the country can stand on its own feet after it exits its bailout in August.

Eurozone finance ministers have extended maturities and deferred interest of a major part of their loans to Greece, along with a big cash injection, to ensure the country can stand on its own feet after it exits its bailout in August.

Greece has been living primarily on money borrowed from eurozone governments in three bailouts since 2010, when it lost market access because of a ballooning budget deficit, huge public debt, and an inefficient economy and welfare system.

With hundreds of reforms requested by its creditors already completed, Greece has made significant progress, but to lend to it again, investors need to know it will not collapse under the weight of servicing a debt of 180% of GDP.

“After eight long years, Greece will finally be graduating from its financial assistance,” the chairman of eurozone finance ministers Mario Centeno said after hours of negotiations.

“Further debt relief was needed to make Greek debt sustainable in the future.”

Greece’s finance minister Euclid Tsakalotos said the deal made Greek debt viable again and paved the way for a return to market financing.

“The Greek government is happy with this deal,” he said. The key element of the debt relief is an extension of maturities and grace periods on €96.9bn of loans granted to Greece under the second bailout by 10 years to smooth out any sharp debt servicing peaks for decades ahead.

Greece will also get a €15bn loan, which will take the total cash buffer with which it will leave the bailout on August 20 to €24.1bn. This will give it independence from market borrowing for some 22 months, eurozone ministers said.

Athens faces bond repayments of around 7% of its output next year, the first after its third bailout ends in August.

The extension of maturities and deferral of interest and amortisation payments are to reassure investors that Greece can handle servicing its debt long into the future — a confidence- booster needed all the more amid growing market concerns over looming trade wars and rising euro- scepticism.

To provide an incentive for future governments in Athens not to reverse the hard-won reforms implemented under the bailouts, eurozone ministers agreed to offer Greece cash payments of €600m every six months until 2022 if the country sticks to the economic course agreed with creditors.

The money will come from profits made by eurozone central banks on their holdings of Greek bonds that will gradually mature over the next four years.

Reuters


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