German finance minister hails progress in Greek economic reforms

Katie Allen
EU institutions have said deferring repayment terms will allow the Greek economy to grow and pay its dues. Photograph: Leon Neal/Getty Images

Greece has received some rare praise for its reform push from Germany’s finance minister, who has raised hopes that the debt-stricken country will get more bailout funds soon.

Wolfgang Schäuble, who recently said Greece must implement unpopular economic reforms or leave the eurozone, appeared to soften his tone in an interview published over the weekend. He implied that a review into Greece’s compliance with reform demands was progressing and could pave the way for the release of more bailout funds that are badly needed to help Athens meet debt repayments due in July.

“If the Greek government keeps to all the agreements, the eurozone finance ministers could conclude the review on 22 May and soon after that release the next tranche,” Schäuble told the Funke group of newspapers.

The German finance minister said: “The longer it takes, the more it unsettles the markets and businesses.”

The interviewers said Schäuble had praised Greece’s progress on reforms. He also said that thanks to a tough negotiating stance from Greece’s creditors, Athens had agreed to reform state pensions in order to fit the economic circumstances. “That is not easy, I know,” he said. “And it wants to improve the tax system so that revenues start rising again from 2020.”

Greece’s third bailout was agreed in August 2015 and the country is anxiously awaiting for a tranche of those funds to be released so that it can avoid a default on debt repayments. Loans of €7.5bn (£6.3bn), due to be repaid by Athens, mature in July.

In return for emergency funds, Alexis Tsipras’s leftwing government in Greece has agreed to swallow austerity demands but his popularity ratings have suffered as a result.

Despite pressure from Germany, the International Monetary Fund has so far declined to join other international lenders – the European Central Bank and the European Union – in funding Greece’s third bailout, worth €86bn. Berlin has said the IMF’s involvement is crucial if support for Greece is to continue.

The IMF has made repeated warnings that Greece’s debt burden of about €330bn is unsustainable. It has argued that refusing to write off some of the Greek debt burden will crush Greece’s economic prospects. In contrast, the EU institutions have said that deferring repayment terms – rather than waiving payments – will allow the Greek economy to grow and pay its dues.

Schäuble’s words of encouragement follow official figures in April showing that Greece managed to comfortably beat its creditors’ budget demands last year. In 2016 it posted a primary budget surplus – where government income exceeds expenditure once debt interest payments are excluded – mostly as a result of a higher tax take and cuts in public spending.

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