Greece’s agreement reached over debt to avoid Grexit

8 years ago - Published in Finance, Fundamental Analysis

Greece has reached a preliminary deal with its creditors that should pave the way for long-awaited debt relief talks, the Greek finance minister said Tuesday. “The negotiations are concluded,” Euclid Tsakalotos told reporters, according to state agency ANA. After overnight talks, Tsakalotos said a “preliminary technical agreement” had been achieved ahead of a May 22 meeting of eurozone finance ministers, which is required to approve the deal.

Talks on the deal, which includes labour and energy reforms as well as pension cuts and tax rises, had dragged on for half a year mainly due to a rift between the European Union and the International Monetary Fund over fiscal targets. 

Greek lawmakers will have to vote on the package before the ministers’ meeting, with Prime Minister Alexis Tsipras’s government aiming to have both the measures and offsetting measures voted on in the first half of this month. Athens needs to repay €7.5 billion in debt maturing in July.

As part of the reforms, Athens has promised to cut pensions in 2019 and cut the tax-free threshold in 2020 to produce savings worth 2% of gross domestic product. 

In a draft document seen by Reuters, the Fund says Greece can reach a primary surplus of 2.2% in 2018 and aim at 3.5% annually in 2019-2021, if it implements the new measures agreed with its lenders.

Separately, Greek workers protested outside the national parliament in Athens on Monday against the measures required for the second bailout review. “This review serves as the destruction of the people and the pensioners,” Manolis Rallakis, of a pensioners association, told Euronews. A new strike was called for 17 May, just days before eurozone finance ministers are due to meet in Brussels. 
A Eurobarometer survey published last Thursday showed that Greeks have a much more negative view of Europe than the rest of the bloc.

Just 34 percent of Greeks said they thought the EU was a good thing, compared with a Europe-wide average of 57 percent. Some 32 percent of Greeks thought EU membership was “a bad thing”, compared with the EU-average of 14 percent.