ESM chief: We’ll see in August 2018, if Greece needs more debt relief

European Stability Mechanism (ESM) logo Wall Street Journal via

Reuters – Greece’s official lenders will be able to determine if Athens needs further debt relief only in the summer of next year, the head of Europe’s rescue fund (ESM) Klaus Regling said on Thursday, echoing the German government’s line.

Klaus Regling said that Greece “has received more debt relief in the past few years than any other country in the world”, referring to a haircut on debt held by private investors in 2012. He also said that it has benefited greatly from improved lending terms and does not have “a debt overhang for the next few years”.
Athens has received three international bailouts since 2010 and its debt currently stands at 177 percent of economic output.

Its third bailout ends in August 2018 and the issue of debt relief is expected to come up in negotiations over its bailout exit terms in the coming months.

Asked whether Greece needs further debt restructuring and on what terms, Regling said that euro zone finance ministers took a very clear view of that last year and concluded that “at the moment there is no problem”.

“We will look at it at the end of the (bailout) program, at the end of August or just before August 2018, based on the debt sustainability analysis at the time,” Regling told Reuters.

“If there is a need to do more and if Greece continues with reforms, we, the Eurogroup, are prepared to think about that,” he said. “It will only be possible in the summer of next year.”

Regling, speaking in Cyprus after a meeting with Cypriot Finance Minister Harris Georgiades, said that Greece was saving 10 billion euros on its annual debt servicing bill, due to favourable ESM repayment terms.

The International Monetary Fund, which participated financially in Greece’s first and second bailout programs, says that debt relief is necessary for the country to emerge from crisis. Germany has long insisted that Athens needs to focus on reforms instead.

To accommodate the IMF’s need for more specifics on debt relief and to convince it to participate in the third bailout, euro zone governments said in June that in 2018 they would be ready to consider extending the maturities and grace periods of their loans to Greece by a range from zero to 15 years.

The average maturity now is 30 years. But they did not go any further than that and the IMF said it was not enough to calculate Greek debt sustainability.