Greece: Funding deal comes at the eleventh hour - Rabobank

The European Finance Ministers and the IMF have come to an agreement on Greece’s funding and in good tradition, the deal comes at the eleventh hour and is again a bodge to keep all parties happy, explains Bas van Geffen, Quantitative Analyst at Rabobank.

Key Quotes

“The agreement involves disbursements of EUR 8.5bn so that Greece can cover debt falling due shortly. The IMF was technically kept on board with a decision on debt relief, though nothing has really been promised by the European leaders – or by the IMF.”

“Ultimately, the European leaders agreed on a statement that “they are ready to consider extending the maturities and grace periods of their loans by a range of 0 to 15 years” in 2018 – i.e. they agreed to kick the can down the road until after the elections in Germany, where debt relief remains a painful topic.”

“So not really a strong commitment to debt relief then, but rather a carrot being dangled in front of Greece – and perhaps a way to justify this to German voters too: Schaeuble already stated that “further debt relief would only be considered after this current program was finished.” Likewise, the IMF is also keeping the carrot just out of Europe’s reach for now. The IMF said it couldn’t calculate debt sustainability based on this, and therefore will not contribute any actual funds until a form of debt relief is agreed upon.”