There will be no immediate deal between Greece and its lenders that would unlock loans and enable vital debt relief talks, despite some progress on the reforms Athens must implement in exchange, euro zone and IMF officials said.
“Don’t expect any deals today,” the chairman of euro zone finance ministers Jeroen Dijsselbloem told reporters on Friday, noting however, he was “hearing good news from Athens” on headway made in negotiations on a Greek reform package.
“There is more work to be done. We are determined to continue the work. We’re not there yet,” International Monetary Fund Managing Director Christine Lagarde said.
The package of reforms is aimed at producing a primary surplus of 3.5 per cent of gross domestic product in 2018 “and beyond”, according to a deal between Athens and euro zone governments signed last August.
But there is disagreement between Greece, the euro zone and the IMF on whether the measures, which include pension and income tax reform and setting up a privatisation fund and a scheme to deal with bad loans, will be enough to reach that number.
The IMF believes that as things stand now, instead of 3.5 per cent of GDP, Greece will only achieve a primary surplus – the budget surplus before debt-servicing costs – equivalent to 1.5 per cent of economic output in 2018.
The Fund and the euro zone are also at odds over how long Greece will be able to maintain a primary surplus of 3.5 per cent and therefore its ability to service its public debt in the long run. The debt stood at 177 per cent of GDP last year.
Germany and several other countries believe that with proper reforms Greece can keep such a surplus for decades and point to the fact that the country does not need to service its debt for the next seven years.
The Fund says this is unrealistic, and therefore the euro zone must grant the country debt relief through extending maturities and grace periods.
The range of views on whether Greece needs debt relief stem from different macroeconomic assumptions among the lenders on Greek growth and fiscal performance over the next 30 years, officials said.