The eurozone’s 19 finance ministers agreed Monday that officials from the institutions overseeing Greece’s bailout will return to Athens to discuss in more detail the reforms it must make and hinted that the country won’t be required to do much more austerity.
Jeroen Dijsselbloem, the eurozone’s top official, said they will work with Greek authorities on an additional package of structural reforms to be made by the cash-strapped country.
Agreeing on a package of measures involving the tax system, pensions and labor market will bring the country one step closer to getting the next batch of loans from its bailout program. Without the money, it faces bankruptcy and a potential exit from the euro this summer.
Dijsselbloem also said there was agreement on a “clear shift in emphasis” of the policy mix away from budget cuts to structural reforms. That, he said, could help the economy and generate income that the Greek government can use to encourage further growth — such as through tax cuts or spending increases.
Easing up on austerity has been one of the demands of the International Monetary Fund and could help convince it to contribute to the latest Greek bailout program, which was agreed on in July 2015.
Greece dominated discussions at the meeting of the so-called eurogroup after mounting concerns that another Greek debt crisis was brewing. Hopes of a breakthrough that would unlock bailout funds were dashed in recent weeks due to disagreements between Greece and its creditors. That prompted fears in the markets of a Greek debt crisis flare-up — the interest rate on Greece’s two-year bonds, for example, has spiked to a high 10 percent.
Greece remains dependent on bailout loans from its partners in the eurozone to pay its debts. It has a payment hump in July, and without new loans, faces bankruptcy and a potential exit from the euro — as it has at various moments over the past seven years.
Dijsselbloem, who is also the Dutch finance minister, said it would be useful if an agreement on the next stage of the Greek bailout deal is reached “quite quickly simply for stability reasons and confidence reasons.”
By a variety of economic metrics, including growth and the budget, Greece is performing relatively well — certainly when compared to the last few years when the economy shrank by a quarter and unemployment and poverty rates spiked higher. Because of its improved performance, Greece has borrowed less from its bailout fund than originally envisaged in the 2015 rescue, which provided for around 86 billion euros ($91 billion) in loans over a three-year period.
“Anyone who wants to talk about crisis can talk to someone else because the Greek economy is gradually recovering and what we need to do is strengthen that and to give that more of an opportunity,” Dijsselbloem said.
As part of its most recent bailout agreement struck in 2015, Greece committed to more economic reforms in return for loans. Though successive Greek governments have enacted a series of economic reforms, more are being demanded, including to pensions, tax and the labor market.