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VOL. 42 | NO. 25 | Friday, June 22, 2018
Greece heads for bailout exit after deal with creditors
ATHENS, Greece (AP) — Greece's prime minister pledged Friday to stick to agreed reforms and budget targets after international creditors announced debt relief measures to wean the country off its eight-year bailout program, which ends in two months.
Greek bond markets rose on the news of the deal, leading to a drop in the government's borrowing rates. The yield on Greece's benchmark 10-year bond eased 0.2 percentage points to 4.1 percent. The main stock index was up 1 percent in midday trading.
Alexis Tsipras said the measures render Greece's debt sustainable, exceed market expectations and repay a "moral debt" to the Greek people for its long suffering during the financial crisis.
"But this does not mean that we must abandon the prudent path of fiscal balance and structural reforms that the country needs," he added. "It means, however, that we are leaving the thorny path of austerity."
The agreement concluded overnight in Luxembourg by finance ministers from fellow members of the 19-member eurozone grants Greece a ten-year extension in repaying a large chunk of its crippling debt load.
And it provides the country with enough ready cash to coast it over nearly two more years, without having to resort to expensive international bond markets after bailout loans run out in August.
But it also means Tsipras' left-led government in Athens will have to stick to austerity measures and reforms, including high budget surpluses, for more than 40 years. Greece will be monitored on a quarterly basis, echoing the supervision of the bailout years.
"From now on we have targets and we commit to observe them, but it is at the discretion of each Greek government to select the means for achieving these targets," Tsipras said.
Eurozone officials and the International Monetary Fund hailed the decision, and Greek Finance Minister Euclid Tsakalotos spoke of an "historic moment."
"I think it is the end of the Greek crisis," Tsakalotos said in Luxembourg early Friday. "We believe the debt is now sustainable and we will be able to tap markets."
Greece's ability to finance itself after the end of its third bailout was a key concern. The country has issued bonds three times since the beginning of the bailout, twice within the last year. But investors charged high rates to lend Greece the money.
Under Friday's decision, Greece will receive a final 15 billion-euro ($17 billion) bailout loan installment, 9.5 billion of which will shore up an existing cash kitty to keep the country afloat post-bailout.
This, Greek officials said, might even be used to pay off the country's debts to the IMF earlier than planned.
Including previous loans and financing Greece is drawing on, eurozone officials said the country will have a buffer of 24.1 billion euros that cover its financial needs for about 22 months after the end of the program.
Hoping to soothe concerns over Greece's debt sustainability, European creditors also pledged to provide further future debt relief tweaks "in the case of an unexpectedly more adverse scenario."
On the other hand, Greece must achieve ambitious primary budget surpluses — that is, surpluses that exclude the cost of debt servicing — of 3.5 percent until 2022, and an average 2.2 percent from then to 2060.
"Obviously we would have been much happier with a lower fiscal surplus," Tsakalotos said. "We think it's a tough requirement but you have to take the whole package as one."