Talks over the Greek debt issue are underway. The Greek government is aiming at a clean exit from the bailout program in August 2018, the IMF is again starting to raise the issue of further Greek debt relief, while some European circles that used to be influenced by W. Schaeuble are trying to connect medium term debt relief measures to some kind of deliverables.
In any case, the so-called “French key” that has been proposed is a plan that is already being designed and seems to constitute a system linking the level of annual debt repayments to annual GDP growth. In practice, the logic of the proposal is that annual debt servicing obligations will fluctuate according to the strength and performance of the Greek economy.
Holistic growth program
On the basis of what we know so far, the IMF maintains its estimated 1% GDP growth per year in the long term, while the Eurozone expects long-term growth to hover around 2%. This discrepancy causes the difference of opinion manifested in terms of Greek debt sustainability and how it will be serviced. The French proposal seems to reconcile the differences by “boosting” growth, when necessary, and this is why the Greek side must design a “holistic program for growth”, according to the conclusions reached at the last Eurogroup meeting. As Finance Minister Euclid Tsakalotos stated: “If growth figures are disappointing, a greater debt relief could be offered. If growth rates are better than expected, the mechanism will not activated” The growth program would “guarantee” the growth of GDP in coming years via the use of national and community funds, if necessary. The question is how it will be structured, as well as how it will be “received” by European partners and the IMF./IBNA