Excerpt from a Eurogroup Press Conference on Greece

May 25, 2016

Transcript of quotes by Poul Thomsen, Director, IMF European Department
Brussels, May 24, 2016
Webcast of the press briefing Webcast

Poul Thomsen: We welcome what has been agreed, I think all sides had to compromise, overall, building on the fiscal adjustment over the years, the package will put the fiscal adjustment on a stronger foundation. Of particular importance is the agreement to set up an independent revenue agency, I think this is welcome step forward.

We always said an agreement to be credible needs two legs, policy package and measures on debt. In this regard we welcome that is now recognized that the Greek debt is unsustainable and that Greece needs debt relief to make debt sustainable and cannot do on its own efforts. In this regard we also welcome the agreement on the methodology on how to assess debt sustainability, and objectives on what debt relief should achieve.

The measures outlined by Mr. Regling [ESM] are important and build on measures by Greece’s European partners on trying to relieve Greece’s debt. We will have to take a look at these measures in the coming months to make sure that, based on a revised Debt Sustainability Analysis (DSA), they will deliver the necessary debt relief. On the part of the IMF I believe that we have made a major concession. I might as well be open about that. We had argued that these debt relief measures should be approved upfront and we have agreed that they will be approved at the end of the program period, based on a revised DSA at that time. We have all shown flexibility. So how do we take this forward? As Mr. Dijesselbloem said, we, staff and management, we are willing to recommend to our Board that this is a staff-level agreement that can form the basis for IMF support before the end of the year, provided that the revised DSA that we will be producing in the coming months will suggest that the measures that are on the table will deliver the necessary debt relief. I would like to emphasize that this is a recommendation by IMF staff and management, the Executive Board will in the end make the decision about IMF support.

So will the IMF be part of the program?

Mr. Thomsen: Yes, the IMF will participate in this program, this is our recommendation to the Board, provided that the revised DSA suggest that the measures that Klaus [Regling] has outlined are sufficient for us to conclude, that debt is sustainable. There are a number of prior actions that have been agreed, the legislation that has been approved in the last couple of days, still needs to be verified that the prior actions have been met.

The measures are weaker than what you wanted, so is there a chance that you will come back for more?

Mr. Thomsen: We will need to assess the adequacy of the measures and we will only go ahead if they are adequate. Some of the measures are still to be calibrated, and on that basis we will decide if they are adequate to generate the necessary debt relief.

What changed?

Mr. Thomsen: In our DSA that came out yesterday [Monday May 23, 2016] we were precise in quantifying these parameters for the extension and the rollover. What this recognizes is that these measures exist, what it does not do now, it does not provide the quantification. But the measures are there, to be quantified. As I said at the start we have conceded the point that the measures do not need to be approved upfront but will be approved at the end, to be sure that this program will deliver debt sustainability. It will deliver debt sustainability according to our standard criteria, subject to Greece meeting the targets of the program. That is the same as what we gave you yesterday – that yes we had the measures, will have been approved upfront subject to delivery over a three-year period, provided that Greece meets the targets, they will get debt relief. By quantifying these measures here. Yes, it is a change, but I do not see this as a weakening of the debt relief.

Why aren’t the measures quantified now?

Mr. Thomsen: It is recognized here that Europe can deliver the kind of measures that we have been calling for. Yes, they need to be quantified and before we go to the Board is subject to a test that these measures can deliver the necessary debt relief by the end of the program, consistent with the principle that by the end of the program Greece needs to be able to stand on its own. We will not go to the Board if we are not convinced that we have measures that can deliver sustainability by the end of the period. Unless we are convinced that we have a methodology, we have objective, and we have a universe of measures that can deliver that.


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