The Washington Post
Derek Gatopoulos | AP June 28 at 11:12 AM
LAGONISSI, Greece — Greece is on target to tap bond markets for money again by the end of this year and exit its bailout program next summer, European creditors said Wednesday.
But a spat with the International Monetary Fund over how to deal with the country’s enormous debt showed no sign of being resolved swiftly.
Officials from the European Commission, European Central Bank, and a eurozone rescue fund said recent austerity measures that included further cuts to pensions and economic reforms will further solidify Greece’s public finances over the years ahead.
“Greece is entering the final year of the program with a real opportunity to regain market access and actually end the program on schedule in August next year,” Declan Costello, the EU Commission’s Greek mission chief, said at a conference at a luxury seaside resort near Athens.
Greece was first bailed out back in 2010 when it was effectively locked out of bond markets because investors were asking for sky-high interest rates in return for money. Without the money, Greece would have gone bankrupt and most likely have had to ditch the euro currency.
Now those so-called yields are tumbling, a real sign that investors think lending to Greece is a viable option. Once Greece is able to borrow markets in the bond markets to fund its debt repayments, then it won’t need any more bailout cash from its creditors.
The more benign bond market backdrop has come in the wake of the recently passed austerity measures and an agreement with creditors to restart loan installments to Athens, which allows Greece to meet its debt obligations this year.
What happens in the longer term is still the subject of heated debate. With a hammered economy, Greek debt has soared to nearly 180 percent of the country’s annual GDP.
The IMF has stayed out of the current program, Greece’s third bailout, arguing that European lenders are setting unrealistic targets for the Greek economy instead of considering more generous debt relief.
Asked if the gap had narrowed, Delia Velculescu, the IMF’s top official for the Greek program, said: “We’re not there yet.”
She said it was “simply not realistic” to have Greece run a budget surplus after debt and interest payments of 3.5 percent of annual GDP over the coming few years, and 2 percent for the decades after. The country’s rapidly aging population, for one, will make that target even more difficult, she added.
The IMF has said it could join the bailout program for the coming final year if the dispute over debt sustainability is resolved.
And in another note of caution, Nicola Giammarioli, Greece mission chief for the eurozone’s rescue fund, the European Stability Mechanism, said legislating change isn’t enough.
The Greek government, he said, has to start implementing the reforms, such as getting a grip on the bad loans banks hold, collect taxes and privatize state-owned assets.
“We are half way,” Giammarioli said.
The return to market will be a key moment for Greece which has relied on bailout money for the past seven years. In return, successive governments have had to enact big spending cuts and tax rises, a combination that contributed to a deep recession and a surge in poverty and unemployment.
As the creditors’ representatives met Wednesday at the seaside town of Lagonissi, 40 kilometers south of the capital, Athenians struggled with a garbage strike that has left mountains of trash on the city’s streets. Collections have stopped for nearly two weeks after municipal workers demanded an end to short-term labor contracts, challenging a hiring frieze imposed under bailout rules.
The strikers met with Greek Prime Minister Alexis Tsipras on Tuesday, rejecting a compromise proposed by his government, and are planning a protest rally in central Athens Thursday.