Pierre Moscovici pushes Angela Merkel on debt relief for Greece

EU economy chief Pierre Moscovici has said Greece’s European creditors have agreed to provide debt relief so long as the country’s government can deliver on the terms of its third bailout package.

The remarks contradict the German position that an easing in the repayment terms on Greece’s debt is up for discussion further down the track.

Chancellor Angela Merkel said, over the weekend, that debt relief is merely an “option” to be considered in the future.

“The Eurogroup has already discussed this,” Mr Moscovici, the EU’s economy commissioner, said yesterday, in reference to the eurozone finance ministers’ group.

“We have agreed to lighten the interest burden, lengthen the maturity of the debt. It’s something that can be done when the time comes, after the negotiation of a good program of development and assistance.”

The IMF has called on eurozone governments to cut Greece’s debt in order to boost the country’s chances of reviving its economy. Without debt relief, economists doubt the latest bailout will succeed and expect Greece’s euro exit to be back on the agenda next year.

There is still a danger that Greece will be forced out of the euro by the end of 2016, according to 71% of respondents in a Bloomberg survey of economists.

As much as 70% said they believe Greece should be safe for the rest of 2015, though almost half said they thought the €86bn bailout package Prime Minister Alexis Tsipras is targeting will prove to be too small.

Ms Merkel said that she is prepared to discuss debt relief once Greece completes the first round of a new bailout.

“When the first successful assessment of the program being negotiated now is completed, exactly this question will be discussed,” Ms Merkel said. “Not now, but then.”

Like Ms Merkel, Mr Moscovici ruled out a straight writedown of Greece’s debt. “There is resistance across Europe to doing a haircut. In Germany but also in France,” he said. “It’s not a restructuring. It’s a reprofiling.”

ECB president Mario Draghi said last week that Greece clearly needs debt relief. “It’s uncontroversial that debt relief is necessary and I think nobody has ever disputed that. The issue is what is the best form of debt relief,” he said last week.

Alvaro Nadal, chief economic adviser to Spanish Prime Minister Mariano Rajoy, said yesterday that the debt relief debate is a distraction from the real issue of fixing Greece’s economy.

“We all know the volume of debt is very high, but the interest isn’t,” Mr Nadal said. “We can deal with that later on.”

Discussion about easing the debt burden is coming into focus after a week that saw Greece pull back from the brink of financial collapse. While the bailout agreed upon has split the Tsipras government, it also cleared the ECB to inject more funds into the country’s financial system.