Greece looks for more debt relief this month for credible return in the bond markets

Aurel Dragan 07/06/2018 | 15:31

Greece is preparing for a new bailout deal this month consisting in a debt relief that will help make its return to bond markets credible. According to a Greek government official, cited by Reuters, the deal will come along with a cash buffer and EU monitoring.

The Greek officials are in Paris for talks with IMF lenders and euro zone representatives. According to Greek officials the deal is only weeks away and the success or the program will give the country the possibility to regain sustainable market access beyond 2018 and 2019. Right now there is risk of contagion from difficulties in the Italian bond market where the politic situation has driven the yields higher si the Greeks wants to decouple from Italy.

Greece is hoping to get a three-pillar strategy of a cash buffer, post-bailout surveillance by the European Commission and debt relief to manage a credible return to markets. The Helenic government also wishes to bring up the cash buffer to EUR 20 billion, which would allow it to abstain from tapping markets for more than two years if issuing conditions are not favourable.

The country will stick to existing fiscal and reform targets but new conditions would be imposed. Yet, the officials are optimistic that loans will be extended under the debt relief deal at the euro zone finance ministers on June 21.

With growth strong and revenues coming in better than expected, the government now sees room to ease taxes and increase spending on things like child poverty. The government intends to cut taxes by about EUR 700 million next year, when EUR 1.2 billion is expected to be available with 75 percent going to tax cuts and 25 percent to higher spending. By 2022, the extra money is seen reaching EUR 3.5 billion with half going to taxes and half to spending.

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