Now or later? Euro zone, IMF at odds over when Greece should get debt relief

Thu May 19, 2016 6:50am EDT
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By Jan Strupczewski

BRUSSELS (Reuters) - The euro zone and International Monetary are struggling with Greece's debt crisis - not with Athens this time, but with each other over when to give Greece a break on its future massive debt repayments.

The euro zone has begun talks on debt relief for Greece but wants to postpone the final decision until 2018; the IMF insists Greek debt repayment is unsustainable and investors need clarity now.

Euro zone finance ministers are likely to forge a tentative plan when they meet next Tuesday - what in Brussels-speak is known as a political agreement. But their offer is unlikely to be anything but highly conditional, euro zone officials preparing the talks said.

The gist is to find a way to lower Greece's debt-repayment burden without actually cutting the debt itself via a so-called haircut. Instead, Greece's debt would be "re-profiled" - less interest, longer maturities, limits based on growth etc.

On May 9, the ministers asked their deputies to explore such specific measures which could be offered to Greece "if necessary" at the end of the bailout in 2018 if Greece implements all the agreed reforms.

The caveat "if necessary" has appeared in all euro zone statements on Greek debt relief since November 2012, mainly on the insistence of countries led by Germany, which do not believe it is needed at all.

The IMF has no such qualms. "To restore debt sustainability ... decisive action by our European partners to grant further official debt relief will be essential," it has said.

The euro zone, however, has its competing members' views to deal with, which they will attempt to satisfy next week. Even with the "if necessary" phrase still in, officials say Greece and its euro zone lenders could both call it a victory.   Continued...

Anti-austerity protesters gather in front of the parliament during a rally in Athens, Greece, July 10, 2015. REUTERS/Jean-Paul Pelissier/File Photo