Bailout review needs a debt agreement, eurozone official says

5 November 2016
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The second bailout review is unlikely to conclude without an agreement on a Greek debt settlement that would satisfy the International Monetary Fund, a senior eurozone official said on Friday. However, he added that, despite the expected difficulties, he was optimistic that a deal could be reached within 2016.

“I am convinced it is possible to have it completed within 2016. It will take significant efforts and it will not be easy, as there is a series of issues requiring political decisions,” the official said, citing labor reforms and fiscal targets for 2017 and 2018, among others.

The December 5 Eurogroup meeting will be the last for this year, and for the bailout review to receive the eurozone finance ministers’ nod there will have to be an agreement with the creditors by the end of November.

However, despite the optimism expressed in Brussels, there is only limited time for everything that has to happen by the end of the month: Besides the review, there has to be an agreement on the debt allowing the IMF to agree to take part in the program in principle. The IMF officials will then have to go to their Board of Governors with a proposal favoring the Fund’s participation in the program.

“All this has to take place simultaneously,” the eurozone official argued: “It is an ambitious project but not an impossible one,” he added, making clear that in case this is not done within 2016, “it will not be the end of the world.”

If there is no decision on December 5, then the whole affair will move to next year, given that the same official considers it technically difficult to have an extraordinary Eurogroup meeting within December.

The International Monetary Fund’s debt sustainability analysis is not expected before the conclusion of the second bailout review, as it will need to include a series of parameters that will only become known at the end of the negotiations, such as what fiscal targets will be set.

The official also attributed all talk about opening the social security issue during the second review to a translation error, as the issue to be discussed only concerns the reform of welfare benefits.

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