Euro Zone Gives Go Signal for Greece Debt Relief

Euro zone finance ministers have come to an agreement over a debt relief package for Greece as well as a new disbursement of 15 million euros as part of its present 86 billion euro bailout program, according to the head of euro zone finance ministers.

The agreement includes a decade-long extension of the maturities on loans from the European Financial Stability Facility plus a 10-year deferral on interest payments, said Mario Centeno in a news conference.

Centeno also said that this will enable Greece to issue bonds across the yield curve. The country may also have to pay lower borrowing costs on its new bonds since the new package of aid will aid in setting up a cash cushion worth 24.1 billion euros, which would cover most of Greek financing requirements for as long as 21 months, added Centeno.

Greek Finance Ministers Euclid Tsakalotos stated on Friday that the deal that will extend and defer repayments on part of Greece’s debt pile was a clear signal to markets that the country had turned a corner from the crises that has trampled the country in the past.

The deal that offers Greece a 10-year deferral and maturities extension over a huge chunk of past loans, along with the 15 million euros in new credit, will almost guarantee that Greece could be financially better after it comes out of its bailout in August.

“I have to say that the Greek government is happy with this deal. We consider that debt is now viable; we can now have access to the markets. But at the same time this government will not forget what the Greek people went though in the past eight years,” Tsakalotos said.

The country’s current bailout is the third “rescue” program for it since 2010, and it is scheduled to end in August.

“I think this is the end of the Greek crisis. I think Greece is turning a page. I think it has all the building blocks there to leave the program with confidence that we can access the markets and we can implement our growth strategy and turn the agenda away from one of fiscal adjustment to one of growth,” he added.

Meanwhile, the International Monetary Fund said that it welcomed the deal and debt relief for Greece. The IMF also added that the aid will improve debt sustainability in the medium term, though it added that it had some reservations for the longer run.

“The additional debt relief measures announced today will mitigate Greece medium-term financing risks and improve medium term debt prospects,” said Christine Lagarde, who is the IMF’s managing director.

However, she also added that the IMF will not join the expiring 86-billion-euro bailout since the time “has run out.” She maintained that “reservations” will exist on the longer term sustainability of the Greek debt, which runs until the year 2060.

Lagarde stated that the fund will start assessing the sustainability of the Greek debt “as early as next week.” According to her, the fund will still be engaged in Greece and will participate to the monitoring of the Greek economic performance and reforms even after the end of the program.

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