Eurozone finance ministers will be meeting in Brussels later this afternoon for their latest round of negotiations over Greece.
The 19 eurozone finance chiefs will be joined by representatives from the International Monetary Fund and the European Central Bank in talks that are set to be dominated by the state of Greece’s debt, writes Mehreen Khan.
Here’s what to expect:
1. Greece will probably avoid default this summer
The first hurdle in today’s talks will be for creditors to finally sign off on Greece’s first major bailout review. Having passed around €5.4bn in austerity measures through parliament, Greece should now qualify for its first injection of bailout cash since the end of last year.
The tranche is expected to be around €11bn with around €7.2bn used for debt servicing and the remainder to help cover the government’s arrears. The money should keep Greece afloat until the end of the year. In the more immediate term, it will mean Athens will also avoid defaulting on €3.5bn of payments due to the ECB in July – weeks after Britain’s EU referendum.
2. Debt relief talks will stumble on
The main meat from today’s talks will be on the much-discussed issue of debt relief. The IMF will be pushing hard to get European creditors to relent to measures such as capping Greece’s interest payments for the next 24 years and extending the life on its loans by another 40 years to reduce its debt burden.
But member states, led by Germany, will be keen to avoid conceding any measures that could either put their taxpayers on the hook (through subsidising Greece’s debt payments for example) or that lessen the incentive on Athens to carry out bold economic reforms as laid out in its third international bailout.
With both sides likely to dig in their heels, some sort of
fudge compromise is inevitable. In the most likely case, creditors are likely to kick the issue into the long grass again, promising more debt relief measures by the end of the rescue programme in 2018.
3. The IMF still won’t be happy
Debt relief is crucial if the IMF is to stay on board as part of the three-strong group of institutions that are running Greece’s €86bn financial rescue package. But the fund has spent the last year grumbling that it will not provide any more money to the country unless it can be assured that Greece can pay back all its debts.
For all their differences, Berlin is adamant the IMF must stay on board. The fund’s participation was a crucial reason the new bailout was passed by the German Bundestag last year.
As part of any compromise reached today, eurozone member states could decide to buy the remaining €14.6bn the IMF is owed by Greece. They could also concede measures that assure Greece’s debt sustainability up until 2023.
But whatever the conclusions, the IMF is still not likely to get everything it wants – namely a cast-iron promise that European creditors will afford enough debt restructuring to make sure Greece can remain a solvent country over the next decades.