Differences on debt the main obstacle to final agreement on May 22, Eurozone official says

There has been very good preparation on a staff level regarding Greece, a senior Eurozone official said here on Wednesday, expressing hope that this will result in a comprehensive agreement that also includes Greek debt at the May 22 Eurogroup.

The same official pointed to persistent differences between the institutions and certain member-states, however, noting that the forecasts currently gave a 50-50 chance of a final agreement on Monday.

The discussion on the debt remained the most difficult issue to be resolved by Eurozone finance ministers on May 22, the official added, while the obstacle to a final agreement was to find a solution that satisfies all sides.

The official pointed out that the decision of the Eurogroup in May 2016 was the basis for the discussion on the debt and that this was already quite detailed regarding the medium-term debt relief measures. The institutions and some member-states had different opinions on how these measures could be made more specific, the source added.

As to what the overall package for an agreement might entail, the official said that this would include the package of policies that have already been agreed, the implementation of the prior actions (many of which have been presented to the Greek Parliament for approval), the compliance report (which involves the translation of thousands of pages and checking for compatibility with what has been agreed) and the Debt Sustainability Analysis (DSA).

Also to be decided on May 22 is the size of the primary surpluses that Greece must achieve after 2018, with the official noting that the 3.5 pct of GDP target must be maintained for a number of years (though probably not 10) before it was reduced.

Regarding the disbursement of the next tranche of loans, the official said that this will depend on whether the International Monetary Fund (IMF) decided to participate in the Greek programme. The official appeared confident that there would be sufficient time before Greece has to make the next large repayment of loans in July, however, noting that eight weeks remained until that time and also pointing out that in previous cases in the past, the initial agreement of the IMF Managing Director Christine Lagarde has been sufficient.

Asked whether Lagarde will be participating in the May 22 Eurogroup, the official said that this was up to the IMF.

According to the official agenda, the Eurozone finance ministers will be briefed on the “preliminary agreement” between Greece and the institutions on the new measures agreed for the second review and will examine the medium-term fiscal targets, as well as debt sustainability issues.