BRUSSELS International creditors expect the first review of Greek reforms under the latest bailout to start in October, bringing changes to a memorandum of understanding signed with Athens and paving the way for debt rescheduling talks, euro zone officials said.
Euro zone finance ministers will discuss preparations for Greek reforms envisaged by the third bailout, worth 86 billion euros ($96.8 billion), at an informal meeting in Luxembourg on Saturday. No implementation review is possible before Greece’s Sept. 20 parliamentary elections.
“There are elections in Greece. We have to wait for the results,” Luxembourg Finance Minister Pierre Gramegna, whose country holds the EU’s rotating presidency, told Reuters in an interview.
“The next step is a review in October. After the review we will have to discuss the restructuring of the debt, because there is consensus that debt is too high. How to restructure it? There are diverging views,” Gramegna said.
He made clear that talks about debt restructuring would exclude the possibility of a write-off on the principal lent by euro zone governments to Greece under the previous two bailouts — the total now stands at 196.8 billion euros since 2010.
“You can achieve payment relief by extending the grace period, or delaying payments … and avoid a nominal haircut,” he said.
TOUGH TALKS
The review itself, however, may take some time, as it is likely to involve negotiations with the new Greek government that will emerge after the elections. Changes may be necessary as a result of an evolving economic situation.
“The first review is an issue where you negotiate,” an EU official involved in the preparations for the meeting of the euro zone ministers said, speaking on condition of anonymity.
The changes would be necessary because of changing economic data and forecasts and the results of an asset quality review of Greek banks that the European Central Bank will conduct to establish the sector’s recapitalization needs.
“If you look at the development of Memorandum of Understanding in the first program, in the second program — it is a living thing, which changes in its content as a consequence of each and every review,” the official said.
“The same will hold true this time, and will reflect the interactions of the Greek authorities with the institutions representing the creditors,” he said.
He said the debt restructuring discussion after the first review would focus on which economic measure had more relevance for Greece — the debt to gross domestic product ratio, or the ratio of GDP to debt servicing costs.
The choice of the latter would mean that an extension of maturities of euro zone loans and additional grace periods for repayments would be enough to significantly lower the Net Present Value of Greek debt, making debt servicing much easier.
“Technically it is no mystery. Politically, it is not so easy,” the official said.
(Reporting by Jan Strupczewski- Editing by Mark Trevelyan)
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