Creditors Warn Greece on Debt Relief as Inspectors Return
Greece’s lead creditor warned the country on Monday not to stray from reforms agreed upon before the end of its international bailout, as European monitors arrived to check the nation’s finances.
The five-day inspection is expected to focus on government promises over the weekend to offer tax relief as well as plans to scrap promised pension cuts that are due to take effect in 2019.
Klaus Regling, managing director of the European Stability Mechanism, the eurozone’s rescue fund, told Austria’s Die Presse newspaper that Greece needed to stick to its commitments.
`We are a very patient creditor. But we can stop debt relief measures that have been decided for Greece if the adjustment programs are not continued as agreed,” he said. “The debt level appears to be frighteningly elevated. But Greece can live with that as the loan maturities are very long and the interest rates on the loans are much lower than in most other countries.”
Left-wing Prime Minister Alexis Tsipras is trailing opposition conservatives in opinion polls and must call a general election within the next 12 months. Amid large protest rallies led by labor unions over the weekend, the prime minister said that relief measures promised to taxpayers would not jeopardize fiscal performance targets and would be introduced gradually.
Greece has promised to deliver high primary surpluses — the budget balance before calculating the cost of servicing debt — for years to come, along with a series of reforms in exchange for better debt repayment terms.
The end of the bailout means Greece will have to return to international capital markets to finance itself. However, the country faces a troubled return after the financial turmoil in Turkey and Italy halted a decline in Greek borrowing rates. The yield on Greece’s 10-year-bond remains above 4 percent.
The bailout program ended August 20 but the country’s debt level remains near 180 percent of gross domestic product.