Greece gets short-term debt relief from eurozone
Greece won some short-term debt relief from European creditors on Monday, even though it failed to clear the latest hurdle in its bailout programme that has prevented the country going bankrupt and crashing out of the euro.
At a meeting of the 19 eurozone finance ministers in Brussels that was largely overshadowed by the Italian referendum result that forced Premier Matteo Renzi to offer his resignation, Greece's creditors offered some immediate help to the cash-strapped Greek government.
Among the measures offered were a smoothing of some of Greece's repayment profile in order to prevent debt repayment humps on the way and a waiving of an interest rate increase that was due to take effect next year.
The measures have been seized upon by the Greece's left-wing government, which has been losing support according to opinion polls, as evidence that it's getting something in return for all the tough economic medicine that it's been making the country take.
"The eurogroup decision for the immediate implementation of short-term measures for the adjustment of Greek debt represents a considerable success and another decisive step for the Greek economy towards exiting the crisis," said Greek Prime Minister Alexis Tsipras.
In return for successfully enacting a wide-ranging package of economic reforms and budgetary restraints, Greece's creditors have promised to offer some debt relief measures for both the short and long-term.
"They are much more ambitious measures than we expected in May or hoped for, so that's very promising," said Greek Finance Minister Euclid Tsakalotos. "This will start helping the Greek economy all at once."
According to Klaus Regling, the head of the European Stability Mechanism, the body that releases the bailout funds to Greece, Monday's package of measures will reduce Greece's debt burden by around 20 percentage points by 2060. Tsipras said the reduction could amount to some €45 billion.
Though successive Greek governments have slashed spending and raised taxes, Greece is still lumbered by debt of more than 175 per cent of annual GDP because its economy has shrunk by a quarter.
That's far more than any other eurozone country and a level that the IMF - and the Greek government - consider unsustainable. It would take Greece decades of economic growth to get debt down to more manageable levels around 100 per cent of GDP.
The Greek government is looking for much more help over the years ahead from its creditors so it will be able to stand on its own feet, but it still has further hurdles to clear before longer-term assistance is offered - perhaps in the form of longer repayment timetable for Greece's loans or further reductions in the interest rates payable on those loans.
Under the terms of the bailout, which could see up to €86 billion (US$91 billion) in loans over three years, the Greek government promised a series of economic reforms and budget cuts.
To get there, Greece needs to secure successful reviews of its adherence to the bailout programme in stages. Tsakalotos was hoping that he would secure a successful review of the second stage of the programme at Monday's meeting but conceded that there were still three or four issues that needed to be resolved.
These include agreement on upcoming budget surplus targets for Greece, discussions on longer-term debt relief measures and getting Greek bonds one step nearer to being eligible to be bought by the European Central Bank being part of that stimulus programme could help reduce the interest rates that Greece has to pay when it hopes to start tapping bond markets again from 2018.
Greece has for the past six years relied on bailout loans - totalling around €300 billion - from eurozone partners and the International Monetary Fund to avoid bankruptcy.
The IMF, which has yet to commit to Greece's third bailout programme, has argued strongly in favour of a big debt relief package for Greece and has suggested that the forecasts used in the Greek bailout plan are too rosy.
The IMF has said it will only get involved once Greece concludes a successful review of the current phase of its bailout. Dijsselbloem said that a deal this year is unlikely.