The eurozone ended Friday eight years of financial assistance and austerity in Greece.
After a marathon meeting that culminated with an agreement on debt relief, eurozone members have congratulated Greece for legislating hundreds of measures over the last three years and restoring economic growth.
Greece is now due to successfully end its third financial programme, which came into force in 2015, on August 20. Athens has been under the help of European creditors since 2010.
“This is it, we have managed to deliver a soft landing of this long and difficult adjustment,” Eurogroup President Mario Centeno, who chairs the meetings of the euro zone finance ministers, told reporters Friday.
European Commissioner Pierre Moscovici described the moment as “historic” and “exceptional,” while International Monetary Fund chief Christine Lagarde mentioned an “emotional” moment for those who, like her, have been around the Greek debt crisis from the very beginning.
What has been agreed?
To prepare for the moment when Greece will no longer count on funds from European creditors, and will therefore have to tap financial markets, the euro area has softened future debt repayments.
Friday’s deal includes a 10-year extension in maturities related to the second bailout programme as well as a 10-year deferral on interest payments.
It also states that once the second bailout is paid in 2032, European creditors will look at the state of Greek debt again and, if needed, there will be additional debt relief measures. This is because by then Greece will still be owing money related to the third programme.
According to the IMF, which perhaps has been the biggest advocate for Greek debt relief in this process, thanks to these set of measures, Greek debt repayments are no longer a problem in the medium-term. But, in the long-run, the Fund has its doubts.
“There is no doubt in our mind that Greece will be in a position to re-access financial markets, and certainly for the medium-term we are very comfortable,” Lagarde told reporters in Luxembourg.
“As far as the long term is concerned, we have reservations,” she said, although she added that she also took note of the commitment made by European partners to look at Greek debt repayments again in the future — a commitment that, according to Lagarde, has always been honored every time it is put forward.
Friday’s agreement also stipulates a final disbursement to Greece of 15 billion euros ($17.4 billion). This money will be used to help Greece set aside a cash buffer for potential emergency needs in the future.
This buffer will total 24.1 billion euros, thanks to money that Greece had already put aside, and cover all sovereign needs for the next 22 months. This means that Greece won’t have to tap the markets in the coming year and a half, unless it thinks there are favorable conditions to do it.
Where’s the IMF?
The IMF will not be giving any money to Greece under this third financial rescue.
The Fund had been waiting for debt relief measures from Greece’s European creditors before adding 1.6 billion euros to the Greek programme. However, because the process dragged on for so long, the IMF doesn’t have enough time to approve the disbursement before August, when the bailout programme concludes.
“Time has clearly run out,” Lagarde told reporters. But, “the IMF will remain fully engaged in supporting Greece in sustaining its economic recovery and achieving more robust growth in the post- programme period.”
The IMF has nonetheless been a technical advisor to the programme since its start in 2015 and will continue overseeing the economic developments in Greece.
‘The end of the Greek crisis’
Greek finance minister Euclid Tsakalotos told reports on Friday that he was “happy” with the outcome and that indeed it was a “historic” moment for the country.
“I am happy, I think it is the end of the Greek crisis. I think Greece is turning the page. I think it has all the building blocks there,” Tsakalotos, who took charge of Greek finances in 2015 after his predecessor Yanis Varoufakis clashed with Europe, said.
Greece is the final euro country to end European financial help in the wake of the sovereign debt crisis.