Regling to CNBC: Greece may face tighter supervision in exchange for bigger greater relief

27 April 2018
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The manner in which Greece will exit the third – and last – bailout program next August depends on how much debt relief it wants, ESM Managing Director Klaus Regling told CNBC on Thursday afternoon.

The influential head of the European emergency fund delved directly into the dilemma of “clean exit” version “precautionary credit line” after the memorandum ends. The poll-trailing Tsipras coalition government is heavily “investing” in the first prospect, in a bid to shore up its sagging popularity by showcasing what it calls an end to austerity policies and creditors’ oversight. A precautionary credit line, the government side stresses, will essentially mean a fourth memorandum.

Conversely, some European institutions and the Bank of Greece (BoG) have maintained that a precautionary credit line will protect the country as it returns to often volatile sovereign markets.

In his comments, Regling said “it doesn’t seem necessary” for Greece to request additional loans, as long as reforms continue.

“Markets are watching (Greece) very carefully, but if they do (continue reforms) I think Greece can have a clean exit in August and return to the markets,” he said, while also touching on the prospect of increased supervision: “If Greece wants additional debt relief then this surveillance will be enhanced. It will probably be a bit tighter and more comprehensive than what we do in other countries.”

Referring to the IMF’s still undetermined role in the future of the Greek program, he said only four months to go until the bailout ends, with European creditors and the Fund “running a bit out of time.”

He stressed the importance of having the IMF fully on board to give credibility to the program, not only to the European electorate but also to the markets.

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