Just as talk of "Grexit" once again reared its ugly head, it seems a new crisis may have been averted. The euro zone and International Monetary Fund (IMF) have set aside a months-long dispute that could have prevented Greece from receiving fresh bailout funds to keep its government afloat.
Over a conference call, Greece's creditors agreed on a common negotiating position on a tough reform package for the Mediterranean country, Handelsblatt confirmed from sources close to the talks. Some details still reportedly need to be ironed out, but the package should keep Greece's debts sustainable.
Athens still needed to agree to the terms, which were to be presented during talks between the two sides at a meeting in Brussels later on Friday. However without a new injection of cash, Greece will fail to make its next bailout repayment of €7 billion by the deadline in July.
Assuming Athens agrees, a group of monitors from Greece's creditors could go to the country as early as next week, according to sources. Greece is currently on its third round in a series of E.U.-led bailout programs, totalling hundreds of billions of euros since 2010. The latest one, agreed in July 2015, was nearly €90 billion.
Under the latest deal, the IMF has agreed to tougher demands on Greece's budget that were pushed by euro zone finance ministers – above all, Germany. Greece will be required to maintain a primary budget surplus of 3.5 percent for a limited time, likely for the fiscal years of 2018 and 2019. The Washington-based lender had been calling for more quickly relaxing the budget demand to 1.5 percent to ease the burden on Greece's long-suffering economy.
How long the new truce will last seems unclear. The two sides put off a decision on just how quickly the burden will be eased starting in 2020, the sources said. Whether Greece will get any debt relief after 2020, something the IMF has demanded but Germany has rejected, also remains open.
The euro-zone creditors, led by Germany, are expected to continue pushing for a tough approach to Greece's budget. Structural reforms that are being demanded of Greece should become "permanent," said one top negotiator.
Both sides do have an interest in keeping a deal alive. The IMF needs assurances for its own credibility that Greece's massive debt burden can be sustainable in the long haul. Although Germany has demanded tough concessions from Greece, it also wants to keep the Washington-based lender part of the Greek bailout program. German parliament is unlikely to agree to keep lending Greece money if the IMF pulls out.
Martin Greive is a Berlin-based correspondent for Handelsblatt, covering the finance ministry. Christopher Cermak of Handelsblatt Global contributed to this story. To contact the author: [email protected]