US Treasury chief stresses need for Greek debt relief

AP News
Posted: Jul 21, 2016 7:55 AM
US Treasury chief stresses need for Greek debt relief

ATHENS, Greece (AP) — U.S. Treasury Secretary Jacob Lew stressed Thursday the importance of making Greece's debt sustainable, praising the country's progress in reforming its economy as part of its international bailouts but urging it to continue implementing the necessary measures.

Speaking in Athens after talks with Greek Finance Minister Euclid Tsakalotos, Lew said further progress on reforms was important so European creditors could begin discussions with the International Monetary Fund on "the timing and details of debt relief."

"Putting Greece's debt on a sustainable path is critical to Greece's long-term economic health and I encourage all parties to be flexible to successfully conclude this fall's negotiations," Lew said.

Greece has been dependent on rescue loans from other eurozone countries and the IMF in three bailouts since 2010, after massive debt and a loss of investor confidence in the country's ability to repay it left it locked out of bond markets.

To qualify for its bailout loans, successive governments have had to implement austerity measures and reforms, including in the labor market, pensions and social security, as well as raising taxes and selling off state assets. The reforms have come at a high cost, with Greece's economy contracting by a quarter and leaving unemployment hovering at around 25 percent.

Making the country's debt sustainable in the long term has been a key issue, with Greece insisting it needs a restructuring of its borrowings, which are now mainly made up of loans from other countries and the IMF.

"Our position has been clear for quite some time that it's important for debt restructuring to be part of an overall plan for Greece" and for the country's economic future, Lew said, adding that achieving debt sustainability and stability were key to ensuring a return to long-term economic growth.

The IMF, which has yet to commit to Greece's third bailout program, has argued strongly in favor of debt relief for Greece and has suggested the forecasts underpinning the Greek bailout plan are too optimistic.

Although eurozone creditors have ruled out an outright cut in Greece's debt, the repayment timetable for loans could be extended and interest rates could be reduced.

Lew stressed it was key for the country to continue implementing the reforms it has committed to.

"There's still more work to do.... And I think the challenge that Greece is undertaking is a significant one," the treasury secretary said. "But completing the work, continuing to implement privatization, doing the work that's needed to address the non-performing loans will very much strengthen the position that Greece brings in to a negotiation in the coming months."

Lew was also meeting with Greek Prime Minister Alexis Tsipras and other government officials before heading to China for a meeting of G-20 finance ministers and central bank governors.