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Eurogroup to Focus on Greek Debt Relief, Contingency Measures Mechanism

eurogroupppp-thumb-largeThe contingency mechanism to correct fiscal divergence and Greek debt relief will be the focus of today’s (Monday) meeting of euro zone finance ministers.
Greece goes to the emergency Eurogroup in Brussels after the tax and security fund reforms were voted in Greek Parliament early on Monday morning. The parliamentary majority of the SYRIZA-ANEL coalition voted austerity measures amounting to 5.4 billion euros.
However, Greece’s creditors insist on additional measures in case the voted measures fail to meet fiscal targets for 2018. The additional measures proposed amount to 3.4 billion euros. Athens has counter-proposed a mechanism that would automatically cut state spending if the economy diverges from fiscal targets set.
Before the Eurogroup there will be a Euro Working Group with the participation of Deputy Finance Minister Giorgos Chouliarakis. The EWG will evaluate the creditors’ staff level agreement draft and discuss the remaining details for the completion of the bailout program review. Then the EWG will propose the way to designate and legislate the contingency measures.
The International Monetary Fund insists that the precautionary measures should be taken, and so do the finance ministers of certain member states. Even if lenders accept the mechanism Athens is proposing, there are disagreements over the period the divergences should be corrected. The IMF says the discrepancies should be corrected in three months.
According to European officials, the European Commission is willing to accept that Greece is very close to fulfilling its obligations and agrees to the Greek proposal for the cut-off mechanism. The IMF though finds that such a mechanism is not reliable.
In addition, the Fund’s chief Christine Lagarde insists that Europe should provide generous debt relief to Greece in order for the IMF to participate in its bailout.
Germany, on the other hand, through Finance Minister Wolfgang Schaeuble, believes that the Greek debt is sustainable and there is no need for debt easing at the present time.

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