07-10-15

Dijsselbloem: Debt cut talks to happen only once Greece passed reform review

cep economist Kullas says Greek debt should only be lowered when country has actually implemented bulk of reforms

Dijsselbloem (r.) at press conference

Eurogroup chairman Jeroen Dijsselbloem said Greece should successfully navigate the first review of its new rescue program before fellow eurozone finance ministers will consider measures to ease the country’s debt burden, Bloomberg reported. It’s essential for Greek Prime Minister Alexis Tsipras to move quickly on all the required reforms, including financial-sector governance and an overhaul of its pension reforms, Dijsselbloem said at the conclusion of a Eurogroup meeting in Luxembourg.

cep economist Matthias Kullas believes that a debt cut for Greece should only happen once the country has implemented the bulk of the reforms agreed with its lenders. “Regarding the burden put on the creditors, it does not make any difference if they grant Greece longer maturities and lower interest rates or a nominal haircut,” Kullas argued. “Empirical research has shown that – at the same level of debt relief – a nominal haircut has a stronger impact.”