DW: France wants ‘flexibility’ for Greek debt

13 June 2017
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Ahead of crunch eurozone talks on Thursday, France’s new finance minister, Bruno Le Maire, said a deal on debt relief for Greece was close. The issue has caused a rift among creditors, in particular Germany and the IMF.

France’s Finance Minister Bruno Le Maire said Greece is on course to reach a crucial funding deal with bailout lenders this week. “I am optimistic that we will have a good solution. We are not far from agreement,” he said in Athens, where he met with his Greek counterpart Euclid Tsakalotos and Prime Minister Alexis Tsipras.
The French minister traveled to Athens ahead of a meeting in Luxembourg on Thursday, June 15 of finance ministers from countries using the euro currency.

Le Maire said he planned to propose a “mechanism” of “flexibility” to lessen Greek debt repayment based on its economic growth. “It’s a mechanism which should allow us to revise certain parameters based on Greek growth,” he told reporters.

Under the French proposal, Greece would pay more when its economy is on the upswing and less when it stagnates or decelerates.

Divided creditors
The issue of debt relief for Greece has sharply divided its international creditors, the European Union and the International Monetary Fund (IMF), for months in the latest round of talks. The Europeans expect Greece’s economy to grow strongly and its government to bring in large surpluses in revenue in the coming years, allowing it to pay back some debts.
The IMF is less optimistic, arguing there must be further relief for Athens before it can label its debt sustainable and justify loaning Greece any more cash.
But Germany’s Finance Minister Wolfgang Schäuble, in particular, is opposed to debt relief. Following three different bailouts with public money for Greece since 2010, parts of the German government fear that more financial assistance for Greece could cost it votes during general elections in September.

Held-up cash
The impasse has held up a tranche of bailout cash which Greece needs in order to repay 7 billion euros (7.86 billion dollars) of old debt in July. The Eurogroup had postponed its decision on the disbursement of the funds to June 15th, with the key factor being the participation of the IMF – something that Germany insists on.
In an effort to find a compromise, IMF head Christine Lagarde had presented a plan last week under which the Fund would join the Greek bailout now, because Athens is delivering on agreed reforms, but would not disburse any IMF money until the euro zone clarifies what debt relief it can offer Greece.
Underlining the IMF’s willingness to strike a deal after months of wrangling, Lagarde will attend the ministers’ meeting.

IMF proposal
IMF participation in the bailout, even without immediate disbursements, would be enough for the German parliament to back new euro zone loans to Athens, thus ensuring Greece would get enough cash in July to avoid default.
“Everyone thinks there is a high probability we will end up with the solution Lagarde outlined,” an official involved in preparations for Thursday’s meeting in Luxembourg told Reuters.
New French President Emmanuel Macron last month called Greek Prime Minister Alexis Tsipras after his election, saying he was in favor of “finding a deal soon to alleviate the weight of Greece’s debt over time.”
Macron explained his thinking about Greece in an interview to the Mediapart website two days before his election. “I am in principle in favour of a concerted restructuring of Greek debt and in keeping Greece in the eurozone. Why? Because the current system is unsustainable,” he said.

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