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Greece Economic Crisis Declared Over: It Isn’t

Mainstream media is all aglow over the alleged end of the Greek economic crisis. Mainstream media is wrong.

Can-Kicking Deal

This was another can-kicking announcement according to Eurointelligence.

Here it is. Finally, a deal on debt relief for Greece. It is a fudge of sorts, but a deal that ends the eight-year-long Greek debt crisis – for now. These are the main components of the deal:

  • A €15bn loan disbursement at the end of the programme, of which €3.3bn can be used to buy back IMF loans;
  • A 10-year extension of the EFSF loans, and a ten-year deferral of interest payments and amortization starting from 2033; and
  • A return of profits from Greek bonds (SMP and ANFA) held by Eurozone central banks, a total of €4bn, with semi-annual payments and subject to reform targets.

There is no growth clause, no interest-rate cuts, no major buyback programme. This is not debt relief in the way the IMF defines it, but debt relief of the kicking-the-can-the-road variety.

It also leaves Greece with a significant exposure to IMF loans. Even if Greece were to use the €3.3bn to buy back IMF loans, that still leaves €7.1bn to be repaid by 2024.

The IMF abstained almost entirely from the debate as it is now officially leaving the programme and will only participate in the post-memorandum oversight, writes Kathimerini. Christine Lagarde refused to make any statements about Greece. What this means for the IMF role after the programme ends is yet to be seen.

So this is it, after eight years, three bailout programmes and endless eurogroup meetings. And with debt nearly at 180% of GDP, there is still the potential for things to turn wrong. But for now, everyone seems happy.

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