Greece’s creditors will face a decision in the coming weeks about whether or not the country’s debt levels have gotten out of hand, but Klaus Regling, the managing director of the euro area’s bailout fund, has already taken outright debt relief for the country off the table.
There will be no nominal haircut for Greece, Regling told the European Parliament on Tuesday night.
“The way to look at debt relief is gross financing needs — this is the money that the country needs to pay back each year,” Regling, the managing director of the European Stability Mechanism, told a hearing of the ECON committee on Tuesday night. “Looking at it this way, Greece’s debt is sustainable.”
Regling has been pushing this paradigm shift in meetings in Brussels since the summer, in part to win back the International Monetary Fund, which abandoned European rescue efforts for Greece this summer, arguing that the country would never be able to pay what it owed.
“Euro-area taxpayers provide real debt relief each year,” Regling argued, adding that money paid into the Luxembourg-based fund he runs on behalf of the eurozone serves as collateral for its bond issues.
Regling noted that Greece will not have to make its first repayment to the fund, which has financed Greece’s third bailout worth up to €86 billion, until 2023.
Dutch Finance Minister Jeroen Dijsselbloem, who chairs the Eurogroup meetings of finance ministers that steered the euro through its debt crisis, appeared alongside Regling in the Parliament’s public hearing on the EU’s economic assistance to Greece.
“Looking back, there must have been easier ways to come to an agreement but in the end we did,” Dijsselbloem told the committee, recalling a summer of endless meetings and drawn-out summits to keep Greece in the eurozone.
His words come as Greece’s third bailout package is showing its first cracks, with Prime Minister Alexis Tsipras’ government pushing back against some of the reforms it agreed to only months ago as conditions for the new loans.
On Tuesday night, Dijsselbloem delivered words that could have been said at any point since the rescue operations on Greece’s economy began in 2010 — a testament to the lack of progress that has been made in key areas across the years.
“It is absolutely essential that the new Greek government takes ownership of the administrative reforms… addressing bureaucracy, fighting corruption, setting up an independent tax administration,” Dijsselbloem said, listing the same problems that have plagued Greece’s economy since the beginning.
But, for his part Regling, painted a sunnier future for the euro. “The euro crisis is receding, and the balance of risks is shifting to other parts of the world,” he said. “That has everything to do with the painful adjustment that happened in program countries.”