Greece to need no more loans from mid-2018, says bailout chief

Merkel and Lagarde agree Greece needs ‘greater flexibility’ on budget targets

European Stability Mechanism chief Klaus Regling said Greece would “stand on its own feet” from 2018. Photograph: Jasper Juinen/Bloomberg

European Stability Mechanism chief Klaus Regling said Greece would “stand on its own feet” from 2018. Photograph: Jasper Juinen/Bloomberg


Greece will “stand on its own feet” from 2018 and not need any further loans from the European Stability Mechanism bailout fund, its head Klaus Regling has said.

His remarks in Germany on Wednesday came ahead of a meeting in Berlin between International Monetary Fund (IMF) chief executive Christine Lagarde and Chancellor Angela Merkel, aimed at resolving differences over future financing for Greece.

Berlin insists the IMF must remain on board as an Athens creditor alongside European Union institutions, but the IMF has made this conditional on debt relief for Greece – politically unpalatable for Dr Merkel in an election year.

“If the next 18 months are used well, I am confident this is the last programme that Greece will have to undergo,” said Mr Regling to the Süddeutsche Zeitung newspaper.

Pointing to a reduction in the Greek budget deficit from 15.6 per cent of economic output initially to 1 per cent now, Mr Regling said mid-2018 was a realistic date for Greece “to stand on its own feet and borrow money itself on financial markets”.

As with previous loans since 2010, the current, third, loan programme worth €86 million and running until 2018 makes staggered credit releases dependent on Greece meeting reform targets. But IMF participation in this third programme remains unresolved.

With matters coming to a head before a June deadline for repayments to the European Central Bank (ECB), German finance minister Wolfgang Schäuble said he had no doubt the IMF would come back on board.

But resistance has been building steadily towards Germany in Brussels.

European economic affairs commissioner Pierre Moscovici said this week that 19 euro-area finance ministers agreed the Greek people needed to see “light at the end of the tunnel of austerity”.

Nascent recovery

In a recent blog post, two senior IMF officials criticised continued reform demands, saying: “Greece does not need more austerity at this time.”

On the contrary, they said excessive primary surplus targets – how much government income exceeds spending, excluding interest payments – could “prevent the nascent recovery from taking hold”.

Emboldened by this, Athens has spoken out against what it calls “irrational” demands pushed by Berlin, through the European institutions, that Greece hit a 3.5 per cent primary budget surplus by next year and maintain this for a decade.

Without going into detail, Berlin sources said on Wednesday that Dr Merkel and Mrs Lagarde agreed Greece needed “greater flexibility” on budget targets in exchange for greater reform willingness from Athens.

As Germany enters its election cycle, opposition parties have pounced on renewed concerns on Greece – and IMF hesitation to remain involved – as proof that the austerity-heavy rescue strategy demanded of Greece by the Merkel administration has failed.

“For years Schäuble has fooled the German public, although he knows – or should know – that Greece is broke and can only repay its debts through new debts,” said Dr Sahra Wagenknecht, Bundestag co-leader of the Left party.

The bailout-critical far-right Alternative für Deutschland attacked further concessions for Greece as a fig leaf and renewed its call for Athens to be kicked out of the euro zone.