BRUSSELS (Reuters) - The euro zone cannot set the details of medium-term debt relief for Greece now because they will depend on what happens by 2018, the chairman of euro zone finance ministers said on Monday, as pressure grows on the bloc to take decisions this year.
In May, euro zone governments offered Greece debt relief in 2018, but left key details to be decided later - a compromise between Germany’s view that no immediate action was needed and the International Monetary Fund’s call for decisions now.
“In May we said already there are a number of possible measures for the medium term and the extent to which they are necessary is impossible to determine right now,” Jeroen Dijsselbloem said before a meeting of the finance ministers.
“It depends on what happens between now and the second half of 2018 in terms of economic growth, interest rates, inflation and of course the commitment from the Greek government,” he said.
“So that kind of specific clarity of what is in the medium-term package is impossible to give and that was also understood by the IMF in May when we said we can only put a figure on it when we are in the second half of 2018,” he said.
But Greece, the IMF and the European Commission are pushing for a more detailed declaration this year. They say that would improve investor confidence, encourage Greek growth and help Athens eventually return to market financing.
The deadline for more details on medium-term debt relief has become December, because that is when the IMF staff is to recommend to its board whether the Fund should join the now purely euro zone bailout for Greece.
The IMF believes that without substantial relief from the euro zone Greece’s debt is unsustainable. It does not want to commit to joining the bailout without knowing now how much the euro zone would be willing to ease the burden on Athens later.
Greek Prime Minister Alexis Tsipras said in September that debt relief was key for the Greek economy to pick up. Without it, he warned, the country could be forced to ask for more help again and again.
But Germany, which faces elections in late 2017 and where financial help for Greece is a controversial topic, is adamant no discussion on the details should take place now.
Berlin believes that there is no rush, because grace periods the euro zone has granted to Athens mean Greece has almost no debt servicing until 2023.
Greece can get short-term relief measures now, because it completed the first batch of reforms agreed with creditors, but nothing else, German Finance Minister Wolfgang Schaeuble said.
“We said everything in May. We would, after the first program review, look at the short-term measures that the ESM could do,” he told reporters before the meeting.
“That is undisputed and everything else would decided be after the ... program, so in 2018... That does not need to be discussed further, but at the end and in the light of economic developments then. That is what the German Bundestag agreed to and not something else,” Schaeuble said.
The short-term relief steps, for which Greece is eligible, include reducing interest rate risk and smoothing the repayment profile of loans under the previous bailout.
European Commission Vice President Valdis Dombrovskis said that Greece was broadly on track to meet fiscal targets agreed with creditors.
“... We see that they are likely to meet this year’s fiscal targets and also the preparations for next year’s budget show that the primary surplus target, as outlined in the Memorandum of Understanding - 1.75 percent of GDP - is within reach,” Dombrovskis said.
Dijsselbloem said euro zone ministers would return to the debt discussion at their next meeting on Dec. 5.
Reporting By Jan Strupczewski and Francesco Guarascio; editing by Philip Blenkinsop, Larry King