Tsipras blames international creditors for spooking investors

12 Sep 16

Greek prime minister Alexis Tsipras has said criticised international creditors for squabbling among themselves over potential debt relief for the country, which he claims is exacerbating its economic crisis.

His comments came shortly after a key meeting of Greece’s European lenders on Friday, who urged the country to speed up key reforms in order to unlock more bailout money.

In a candid speech to the Thessaloniki annual trade fair, the leftwing Syriza party leader said that the argument over debt relief between the European Union and the International Monetary Fund for Greece's €380bn in liabilities had spooked private investors.

“What is creating conditions of delay in regaining trust of markets and investors is the constant clash and disagreements between the IMF and European institutions,” he said, adding that this has also impeded the country’s participation in the European Central Bank’s €80bn-per-month bond buying programme.

The disagreement centres on when or if Greece should be granted relief for its burgeoning debt pile, currently equal to 180% of the country’s GDP. The nation’s European creditors, particularly its largest lender Germany, have been reluctant to discuss the possibility.

When a third Greek bailout deal of €86bn was agreed last year after months of strained negotiations, European creditors said they would discuss debt relief in 2018, once the programme had finished.

The International Monetary Fund on the other hand, concerned about the country’s debt sustainability, has argued for more forgiving debt relief, and sooner.

As a result of these concerns, the IMF has not so far participated in the third bailout programme.

Since Greece slipped into economic freefall following the financial crisis in 2008, it has lost more than one third of its economic output. Also, unemployment has soared to 26%, and has endured a host of increasingly painful austerity measures in return for its rescue from bankruptcy.

“A country which has made such a harsh adjustment cannot wait much more,” Tsipras said. “It is entitled to fair regulation on the debt issue.”

Last Friday, the Eurogroup also confirmed it would not release a €2.8bn payment, the final part of the first €10.3bn tranche of last year’s bailout deal, because Greece had not pushed through 13 out of 15 unpopular reforms it stipulated, especially in regards to the privatisation of state assets.

Reports from the German business daily Handelsblatt Global a few days earlier, citing European officials, said the group had been due to release the funds but would now put the much-needed payment on hold potentially for the rest of the year.

Following the meeting, president of the Eurogroup Jeroen Dijsselbloem, said: “There was a general feeling that we must not lose time, so more progress is needed and we strongly encouraged the Greek government as a whole to speed up the implementation of the remaining milestones.”

He underscored that this would ensure a “timely start and completion” of the second review of the programme, which the country needed to pass in order to unlock the funds.

“The work on that will have to start very soon,” Dijsselbloem said.

The Greek delegation to the group reported that €1.7bn of the funds would be used to settle outstanding debts to the private sector, and called for immediate short term measures to make Greece’s debt sustainable, and for longer term measures to be decided.

It noted that after a seven-year recession there may finally be some light at the end of the tunnel for Greece, after the country recorded a positive growth rate in the second quarter of 2016. Quarter-on-quarter, the country’s GDP growth stood at 0.2%, compared to -0.2% in the first few months of the year.

Also at the Thessaloniki trade fair, the European Commission announced another €115m in aid for the country’s refugees, who have been stuck in limbo in the already cash-strapped Greece after fleeing countries like Syria, Iraq and Afghanistan. 

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