Greece won’t regain stable access to international bond markets unless creditors ease repayment terms on the country’s bailout loans, European Central Bank (ECB) executive board member Benoit Coeure said.
The country cannot gain “solid and long-lasting market access without the clarity about the sustainability of Greek debt,” Coeure told European Parliament lawmakers in Brussels yesterday, adding that the International Monetary Fund (IMF) should stay fully involved in the Greek bailout to ensure fair treatment in Greek debt talks.
“There are serious concerns about the sustainability of Greek public debt,” the Frenchman said during the hearing. “We are looking forward to a solution that can reassure markets, restore confidence in the dynamics of public debt, allow the full involvement of the IMF in the programme – which would enhance the programme’s credibility – and restore market access for Greece ahead of the end of the program in July 2018.”
The IMF is at loggerheads with Greece’s European creditors as the Washington-based lender insists on concrete and quantified relief measures before extending any more loans to the continent’s most-indebted state. While the institution acknowledges that a nominal haircut on Greek bailout loans is implausible, it has demanded more concessionary repayment terms, including extensions of maturities and a cap on interest rates.
German Finance Minister Wolfgang Schaeuble has said the source of Greece’s woes is a lack of competitiveness, not elevated debt levels, and reiterated calls earlier this week for the IMF to contribute to Greek bailout loans.
The ECB “very much” believes that the IMF should be on board when devising a solution for Greek debt, Coeure said.
The Frankfurt-based central bank has excluded Greek government bonds from its asset-purchase program, pending “an additional level of safeguards and clarity on debt sustainability.”
Even if the government of Alexis Tsipras clears the hurdle of the next review of its economic adjustment program by auditors representing the IMF, ECB, European Commission and European Stability Mechanism, its bonds won’t be included in ECB’s quantitative-easing program without proof its debt is sustainable. Completing the next review is “a necessary but not sufficient condition,” he said.
Greece’s heavy debt burden remains even after imposing more than €100bn ($110bn) in losses on private-sector lenders, in the biggest write-off in history. The first euro-area country to seek emergency support, in 2010, is the only one still reliant on bailout funds from its peers to stay afloat, amid continuous stand offs with currency bloc governments over the policy conditions attached to its loans.
“To bring the programme to a successful conclusion and to restore market access on a lasting basis, it is above all essential that the Greek authorities continue to show a serious commitment to the goals and measures taken in the context of the programme,” Coeure said, adding that he doesn’t expect Greece to be in a position to raise enough cash next year, even if it attempts to test financial markets. “It makes sense to test markets in a gradual way.”