Benoit Coeure: The European Central Bank looks forward to a solution on Greece’s debt

The European Central Bank (ECB) looks forward to a solution on Greece’s debt that will restore the country’s access to the markets, ECB Executive Board member Benoit Coeure said on Wednesday, speaking in the European Parliament Economic and Monetary Affairs Committee.

He noted that a discussion was ongoing in the Eurogroup on the short-term, medium-term and long-term measures needed to secure the sustainability of Greek debt. “All stakeholders in the Greek adjustment programme realise that there are serious concerns about the sustainability of the Greek public debt,” Coeure pointed out, noting that the ECB had supported a debt sustainability analysis that evidenced this conclusion.

“We are looking forward to a solution that can reassure markets, restore confidence in the dynamics of public debt, allow the full involvement of the IMF in the programme, which would enhance the programme’s credibility and restore market access for Greece’s ahead of the end of the programme in July 2018, without undermining the reform effort,” Coeure said.

At the same time, the Greek government had to show serious commitment to the goals and measures taken in the context of the programme, so that all stakeholders can be confident that reforms will not be reversed and instead be strengthened in the aftermath of the programme, he added.

“A year ago, European leaders agreed on a set of measures that will secure the future of Greece in the eurozone …If everyone plays their part, I am firmly convinced that at the end of the programme Greece will be in a better position to reap the benefits of Economic and Monetary Union and its economy will be stronger and more resilient,” he told MEPs.

“We can make Greece stronger in a stronger Europe,” he added, pointing out that Europe needed a strong economy in order to address issues of security and migration and “had a lot to do to make economic and monetary union stronger.” The ECB, as central bank for the euro and therefore of Greece, was committed to playing its role, he added.

Noting that the conclusion of the first review was a great step forward for ensuring fiscal stability and preparing the way for economic recovery, he said that a lot more remains to be done and cited two “deliverables” that the ECB expects in the context of the second review.

The first was an overhaul of the out-of-court workout framework to provide creditors and debtors with an incentive to become involved in mutually advantageous schemes. The second “deliverable” was the development of a corporate insolvency court to support restructuring of the Greek non-financial sector and to overcome possible obstruction by non-cooperative shareholders. More generally, he noted a need for a strong justice system in order to support Greek banks struggling with high levels of non-performing loans and to restore confidence that was slow in returning, as evidenced by the fact that deposits were still at three quarters of their level in late 2014.

Replying to MEPs questions, Coeure admitted that the ECB had been overly optimistic in some of its forecasts about the Greek economy, which were not borne out, but also pleasantly surprised by other developments, such as a lower-than-expected recession in 2016, indicating a return to growth.

He said that levels of cooperation and dialogue between the creditor institutions and Greek authorities were much improved, which he attributed largely to Greece’s Finance Minister Euclid Tsakalotos.

Regarding the future, he noted that the ECB considered it essential that Greece’s Eurozone partners fulfill their commitments for a settlement on public debt, in order for Greece to gradually regain its access to markets. “We also have concerns about the sustainability of Greek public debt,” he said, with respect to the IMF position on this issue.