Eurozone finance ministers raised the pressure on Greece to deliver a fresh set of reforms on Friday, handing Athens a final hurdle to unlock cash from its massive bailout and secure debt relief. Eurogroup head Jeroen Dijsselbloem said a deal to offer dearly needed bailout loans to Greece could happen as early as Thursday as long as Athens delivered on an extra set of reforms.
These so-called "contingency measures" would be triggered only if leftist-led Athens failed to meet its budget targets and are a key demand of the International Monetary Fund. "If we have the package, we can have a further Eurogroup next Thursday to come to a conclusion on the first review" of Greece's bailout plan, said Dijsselbloem after the finance ministers of the 19 countries that use the euro currency met in Amsterdam on Friday.
In return for those reforms, eurozone governments would then embark on talks to offer Greece debt relief, one of the only concessions allowed Greek Prime Minister Alexis Tsipras when he secured the bailout in July. Reducing Greece's mountain of public debt is also a condition by the IMF to remain a partner in the rescue of Greece. IMF chief Christine Lagarde, who also attended the talks, said that debt relief was "critically important".
But she said that any cancellation of debt, or haircut, was off the table. "I believe that no haircut is needed, and the nominal value of the debt doesn't have to be changed," added Lagarde. Official EU data on Thursday said that Greece's debt stood at 177 percent of gross domestic product (GDP) in 2015 - almost twice Greece's entire economic output in one year.
But the debt question is extremely sensitive in Germany, the eurozone's most powerful member, which believes that Greece's debt load is manageable. "This topic is not the priority and above all, it should not distract us from what still needs to be done," said German Finance Minister Wolfgang Schaeuble. But hard-line Germany also considers the IMF a crucial partner in the bailout programme, and is forced to concede on debt relief in order to keep the fund on board.
The ministers met in parallel to crunch talks in Athens to close the bailout review between Greece and the institutions handling its bailout: the EU, the European Central Bank and the IMF. Accomplishing this step will unlock bailout loans, but has been delayed by disagreements over pension cuts and bad loans. Greek Finance Minister Euclid Tsakalotos and other ministers said most of those problems had been solved and that the negotiations were in the final stretch. But Tsakalotos said agreeing the deal was "absolutely crucial".
It would "give a clear signal to EU (and) Greek citizens, Greek and international investors, that Greece has turned the corner." The Greek government in July faces big repayments to the European Central Bank, amounting to about 2.3 billion euros ($2.6 billion). "I hope that all this can be concluded soon, because the liquidity situation is becoming tight," warned Klaus Regling, the head of the eurozone bailout fund, the European Stability Mechanism.