ESM urges Greece to stick to reforms, calls IMF to join bailout – chief economist

1 June 2018
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Greece must commit to implementing reforms in order to shield itself from external risks as it emerges from its third international bailout, the chief economist of the euro zone’s rescue fund said in an interview published on Friday.

“As Greece enters the final months of its ESM programme it is crucial that it remains determined in implementing the remaining reforms and in staying the reform course after the programme ends,” the European Stability Mechanism’s (ESM) Rolf Strauch told Greek newspaper Naftemporiki.

Greece has signed up to three international bailouts since 2010, when its debt crisis broke out. Its current rescue programme, which includes policies prescribed by its European Union and International Monetary Fund lenders, ends in August.

Asked whether Greece was ready to fund itself only through markets, in an environment of increased risk due to political developments in Italy, Strauch said that investors “have honoured Greece’s reform efforts”, citing previous bond issues.

But he warned that countries exiting a bailout programme “are vulnerable to external events”.

“There is no magic number for the ‘right’ yield. It is a process,” he said. “The best thing Greece can do now is to demonstrate strong reform ownership and to clearly signal that the successful reform course will be continued.”

Greece wants a clean exit from its bailout, without a precautionary credit line which usually comes with strict conditions attached. It has been building a cash buffer of unused loans and money raised from markets instead.

European lenders have also been negotiating a deal to provide further debt relief to the country. Euro zone policy makers will seek last-minute backing this week from the IMF for their debt relief offer to Greece. [L5N1T16GB]

The IMF participated in Greece’s first two programmes but refused to join the third which began in 2015. It says the euro zone must agree on how to make the country’s debt, now at 179 percent of GDP, sustainable.

Strauch said the ESM “has been working very hard so that the IMF can still activate its programme”, even last-minute.

“We hope that the IMF can come on board during the final stretch of the ESM programme,” he said.

Source: Reuters

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