Euro zone to honour Greece debt pledge, insists on conditions

Vice President of the European Commission Olli Rehn (left), President of the Eurogroup an Finance Minister of the Netherlands Jeroen Dijsselbloem (centre) and President of the European Central Bank Mario Draghi (right) give a press conference of the
Vice President of the European Commission Olli Rehn (left), President of the Eurogroup an Finance Minister of the Netherlands Jeroen Dijsselbloem (centre) and President of the European Central Bank Mario Draghi (right) give a press conference of the Eurogroup as part of the Informal Meeting of Ministers for Economic and Financial affairs at the Zappion Hall in Athens on April 1, 2014. -- FILE PHOTO: AFP

BRUSSELS, Belgium (AFP) - Euro zone member states will honour a 2012 pledge to help Greece manage its crushing debt mountain but Athens must first meet conditions set, Dutch Finance Minister Jeroen Dijsselbloem said on Monday.

At the same time, any debt review will come only later this year after Greek efforts to live up to its rescue programme commitments and put the economy and banks back on track are assessed, Mr Dijsselbloem said after a meeting of the 18 eurozone finance ministers.

Euro zone nations “reaffirm their commitment to provide adequate support until Greece regains full market access, provided Greece fully complies with the requirements and objectives of the adjustment programme,” the ministers said in a statement.

“The relative merits of possible debt sustainability measures, as stated (in November 2012) will be considered in the context of the next review,” it added.

Greece has been pressing its eurozone partners to begin debt relief talks as soon as possible, having last year chalked up a primary budget surplus, a key landmark set for the country’s recovery.

EU data agency Eurostat confirmed last month that Athens had achieved a 2013 primary budget surplus – the balance before interest, bank support and other payments are counted – equal to 0.8 per cent of GDP.

Greece is also returning to growth after six years of brutal recession which has shrunk the economy by a quarter.

But it remains saddled with a debt mountain equal to some 175 per cent of GDP, way above the EU limit of 60 per cent.

Mr Dijsselbloem said Greek Finance Minister Yannis Stournaras had raised the issue directly at the meeting and pressed “the importance of the (euro zone) sticking” to the 2012 pledge to consider further measures.

“It is too early to go into that,” Mr Dijsselbloem said when asked which specific measures could be applied, adding that to “assess those conditions we need the outcome of the review.” He said, for example, stress tests this year will give a much better picture of the banks’ finances and how much more or less funding Athens would need to provide.

The EU, European Central Bank and the International Monetary Fund provided Greece with a 110 billion euro (S$190.8 billion) bailout in 2010 and another 130 billion euros in 2012.

The second rescue also included an unprecedented private sector debt write-down worth more than 100 billion euros and there has been speculation that Athens may seek a similar measure in the coming months.

Greece has committed to cutting debt to below 110 per cent of GDP by 2022, a massive adjustment many analysts believe is not possible without another outright write-off.