By T. Tsiros
Resumed negotiations between Athens and its institutional creditors, ahead of the fourth and last review of the current (third) bailout, will also revolve around the imperative Greek debt issue.
Three different reports on the sustainability of Greece's external debt are pending, along with talks on a "cash buffer" that will accompany Greece in its necessary forays into the sovereign money markets when the current memorandum, and its guaranteed low-interest credit line, ends. The "lion's share" of Greece's debt is now held by the European Stability Mechanism (ESM).
Finalization of medium-term debt relief measures will be on the table of negotiations, along with an increasingly probable "French formula" whereby the rate of debt relief is pegged with economic growth posted by the country on an annual basis.
Finally, possible long-term debt relief measures - given that a complete pay-off of bailout loans is forecast after a distant 2050 - along with whatever new commitments will be demanded by the current leftist-rightist coalition government are also expected to be broached.
Officially, negotiations will resume on April 22, coinciding with the spring meetings of the International Monetary Fund and World Bank group in Washington D.C., although preparations have already begun on a technical level. The unofficial deadline for concluding negotiations is the Eurogroup meeting on June 21 in Luxembourg.
Analysts estimate that no further margins for talks are available, given that the Greek debt issue is linked with loans that have still not been disbursed to Athens, as part of the third bailout, which officially ends on Aug. 20.
Regarding recently surfaced reports of a "technical extension" of the third adjustment program (memorandum) until the end of the year, Greece's finance ministry this week categorically rejected any such prospect.
The "five milestones" in the concluding the third Greek program are, in detail:
- The three different reports on debt sustainability, one by the EU, a second by the ECB and a third by the IMF
- Medium-term debt relief measures, which have previously and repeatedly been identified as extending maturities of loans extended to Greece by institutional creditors, refinancing of short-term obligations and a return of profits from bonds held by creditors.
- A gradual implementation of medium-term measures, along with an agreement over additional fiscal targets and even reforms.
- Linking whatever future measures with the course of GDP growth, i.e. a ceiling of 15 percent of annual GDP in terms of servicing the external debt.
- Agreeing to long-term debt relief measures, something cited in a Eurogroup decision from June 2017, although details are not expected at this phase.
- Finalizing a "cash buffer" for the post-memorandum period, with initial estimates pointing to 14 to 16 billion euros. Negotiations with creditors are expected to determine whether 12 billion euros left over from the third bailout's credit line will be transferred to the "cash buffer".