ESM's chief says EU, IMF in no mood for a Greek debt haircut

By Reuters

Sep 20, 2014 08:15 PM EDT

Greece's international creditors have no appetite for considering a haircut as a way to lighten its debt load, the head of the European Stability Mechanism, the euro zone's bailout fund organization, told Greek Sunday newspaper Realnews.

Athens is anticipating further debt relief measures from its euro zone partners and the International Monetary Fund later this year after managing to shore up its finances and post a budget surplus before interest payments.

"There is no political mood in the EU or the IMF for a Greek debt haircut," ESM's managing director Klaus Regling was quoted as saying by the paper.

Athens has relied on a 240 billion-euro ($300 billion) EU/IMF financing package since the second half of 2010 to stay afloat. Bailout funding from its euro zone partners ends in December while IMF aid will run out in the first quarter of 2016.

Further relief on Greece's debt, which is seen topping 177 percent of economic output this year, is likely to come in the form of stretched maturities and reduced interest rates, the country's finance minister told another newspaper, with Athens building its own funding buffer by tapping markets.

"(The buffer) is a sum of about 5 to 7 billion euros ... it's our security," Finance Minister Gikas Hardouvelis was quoted as saying by Sunday's To Vima.

Greece ended a four-year exile from bond markets earlier this year with successful sales of three and five-year bonds. It plans to issue seven-year paper in the coming months and expects to start debt relief talks by the end of 2014.

But Regling, commenting on debt relief moves, said creditors were in no rush: "We are not even sure there is indeed a need for such small interventions," he told Realnews.

The 500 billion-euro ESM fund was created during the euro zone sovereign debt crisis as a backstop for governments cut off from markets. It can lend to distressed sovereigns in exchange for a program of strict reforms.

Regling told the paper the IMF would continue to fund Greece up to the first quarter of 2016 and that until then the EU/ECB/IMF troika would still supervise the country's economic adjustment program under its bailout.

"The troika will continue to exist as is and conduct quarterly checks but with the IMF's loan disbursements at stake, the fund will have the driver's seat," Regling said.

Greece could always opt to forego the remaining IMF funding to avoid further audits but Regling told the paper this was very unlikely as it is not certain such a move could be borne by its budget.

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