Greece gets debt relief from euro zone

  22 June 2018    Read: 1274
Greece gets debt relief from euro zone

Euro zone finance ministers on Friday extended maturities and deferred interest of a major part of their loans to Greece along with a big cash injection to ensure Athens can stand on its own feet after it exits its bailout in August, Reuters reported.

Greece has been living primarily on money borrowed from euro zone governments in three bailouts since 2010, when it lost market access because of a ballooning budget deficit, huge public debt and an inefficient economy and welfare system.

With hundreds of reforms requested by its creditors already completed, Greece has made significant progress, but to lend to it again, investors need to know it will not collapse under the weight of servicing a debt of 180 percent of GDP.

“After eight long years, Greece will finally be graduating from its financial assistance,” the chairman of euro zone finance ministers Mario Centeno told a news conference in the small hours of Friday after hours of negotiations of the deal.

“Further debt relief was needed to make Greek debt sustainable in the future,” he said.

Finance Ministers Euclid Tsakalotos told reporters the deal made Greek debt viable again and paved the way for a return to market financing.

“The Greek government is happy with this deal,” he said.

The key element of the debt relief is an extension of maturities and grace periods on 96.9 billion euros of loans granted to Greece under the second bailout by 10 years to smooth out any sharp debt servicing peaks for decades ahead.

Greece will also get a 15 billion euro new loan, which will take the total cash buffer with which it will leave the bailout on Aug 20 to 24.1 billion. This will give it independence form market borrowing for some 22 months, euro zone ministers said in a statement.

Athens faces bond repayments of around 7 percent of its output next year, the first after its third bailout ends in August.


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