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European Commission holds firm on Greek debt-to-GDP target

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European Commission holds firm on Greek debt-to-GDP target

Photo © vieraugen - Fotolia

(BRUSSELS) - The European Commission does not intend to push for a Greek debt-to-GDP ratio of less than 120 percent by 2020, the key target in a second bailout agreement, a spokesman said Tuesday.

That figure, agreed with the bailout Troika of the Commission, the European Central Bank and the International Monetary Fund, is already "an ambitious target for Greece, and we stick to it," said Olivier Bailly, senior Commission spokesman for the economy.

Bailly was responding to a report in Tuesday's Wall Street Journal of discreet IMF pressure for have Greece debt ratio reduced to 100 percent of gross domestic product by the same year.

The newspaper said perennial fears over the sustainability of Greece's debt meant the Washington-based IMF now wanted governments holding Greek public bonds to accept losses in the way private investors accepted a "haircut" -- in the end worth 97 percent of paper value -- as part of the second bailout negotiated earlier this year.

Alongside the write-down of private holdings and public-money "sweeteners" for banks caught in the headwinds, the eurozone and the IMF initially agreed in March to lend Greece another 130 billion euros on top of a previous 110-billion-euro rescue, in a bid to bring its debt-to-GDP ratio down from 160 percent.

However, struggling with a fifth year of recession and public anger at the impact of austerity, political deadlock around back-to-back elections in May and June left the country's reform programme off track.

The government has still to implement 11.5 billion euros in spending cuts over the next two years, but Finance Minister Yannis Stournaras said in Athens on Tuesday that agreement has yet to be reached on how to do that.

The Troika's auditors are not expected to return to Greece until September for the next round of negotiations.

Eurozone sources already conceded last month the possibility that a form of restructuring of Greek debt among public creditors would be the only realistic avenue if more help is needed to make the numbers stack up in Athens.


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