Debt Concessions

Euro Finance Ministers Bend on Greece

euro finance ministers-ap
Dutch finance minister and chair of the Eurogroup finance ministers Jeroen Dijsselbloem (right) and Greece's Finance Minister Euclid Tsakalotos have plenty to smile about after Monday's meeting.
  • Why it matters

    Why it matters

    • Greece’s international creditors need to end a dispute over the country’s progress on reforms ahead of Britain voting on whether to stay or exit the European Union in its June 23 referendum.
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  • Facts

    Facts

    • The euro-zone finance ministers offered to extend maturities, limit repayments and cap interest rates on Greek debt from 2018 if the Athens delivers by then on all reforms agreed under its present bailout.
    • The plan approved by the finance ministers is to be finalized by their deputies ahead of a second high-level meeting May 24.
    • The IMF has resisted joining the bailout. The ministers said they expected their agreement on debt relief “ to allow the IMF to participate in the program.”
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One more time, Europe plans to meet Greece halfway in a bid to keep the beleaguered Mediterranean country out of bankruptcy. Athens will have to pay back its huge debt load later and with less interest than originally promised.

Euro-zone finance ministers agreed to a plan at a meeting in Brussels Monday to grant Greece debt relief by extending maturities, limiting repayments and capping interest rates from 2018, if the country delivers by then on all reforms agreed under its present bailout.

But the steps still don’t go quite as far as Athens had hoped. They don’t include a reduction in the principle of Greece’s loans from the 19-nation euro zone, totaling more than €200 billion ($228 billion).

The talks on Monday were about “exploring options,” said Jeroen Dijsselbloem, the Dutch finance minister who presided over the meeting, adding that without some form of debt relief, the country would likely never be able to repay its debt.

But Mr. Dijsselbloem categorically ruled out crossing two “red lines.” These would be offering a debt “haircut,” which would forgive part of the debt, and abandoning the current aid program.

The plan, approved by the finance ministers, is to be finalized by their deputies ahead of a second meeting on May 24.

In reality, the deal came down to two major players, in the form of a compromise between German Finance Minister Wolfgang Schäuble and Christine Lagarde, the head of the International Monetary Fund.

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