Greece Starts Paying Back the ECB, IMF: Report

Greece has begun to repay the 6.25 billion euros ($6.8 billion) it owes to the European Central Bank (ECB) and International Monetary Fund (IMF), finance ministry officials told Reuters Monday.

However, experts are worried that the next round of bailout talks is skating over one vital subject: Debt relief.
According to Reuters, Athens on Monday began paying back 4.2 billion euros in principal and interest to the ECB and 2.05 billion euros in arrears it has owed the IMF since it stopped repaying its debts at the end of June.

It is also repaying a 500 million euro loan to the Greek central bank.

The country is paying its bills using a 7.16 billion euro bridging loan secured last week after it agreed to a series of harsh reforms. The measures, which have to be put into law, should result in the country receiving its third bailout.

Talks over the details of a third, 86-billion-euro ($93 billion) bailout for Greece are due to start in earnest on Monday after euro zone parliaments gave them the green light last week.

Debt relief dominates

However one thorny topic is likely to dominate discussions: that of debt relief for Greece. Even the International Monetary Fund (IMF) has advocated such a move – but the fund’s former deputy director told CNBC that it should make the first move.

“If the IMF is serious about debt relief then the right thing for the IMF to do is to write off its own debt – the debt that Greeks owes the IMF,” Ashoka Mody told CNBC Monday. “The IMF has adopted the position that Greece needs debt relief, but somebody else should pay for that.”

Mody’s comments come at a time when the IMF has raised concerns over debt relief for Greece, with Managing Director Christine Lagarde advocating extending the maturities on Greek loans. The country is already battling soaring debt levels, and debt is expected to hit 180 percent of GDP this year, according to the European Commission.

In an interview with French radio on Friday, Lagarde said that a third bailout plan for Greece would “categorically” not succeed without debt restructuring.

The issue of debt relief is a thorny subject, however, particularly for countries like Germany, which feel that debt forgiveness could set a precedent for other indebted members of the single currency region.

Despite this, there were some signs at the weekend that even Germany – Greece’s largest euro zone lender — could be succumbing to growing pressure over debt relief. On Sunday, Chancellor Angela Merkel said in an interview with German broadcaster ARD that discussions over changing the maturities of Greece’s debt or reducing interest payments would be possible after the first successful review of the new bailout package.

She reiterated that a major debt haircut could not happen within a currency union, however.

Despite some apparent softening of Germany’s stance towards debt relief, Volker Wieland, one of Merkel’s economic advisers who are known as the “wise men,” told CNBC on Monday that the chancellor’s comments did not signal a change of tack by Germany.
“I think there can be debt relief in terms of postponing interest but that’s a different message from a debt haircut which would involve taxpayers in Europe (losing money),” he told CNBC Europe’s “Squawk Box” Monday.


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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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