On Athens visit, Dijsselbloem leaves options open on new Greek debt relief and recap via ESM

The possibility of Greek public debt being reduced further is unlikely to be decided before April 2014 but Greece is likely to find out on June 20 if the 50 billion euros it has borrowed to recapitalize its banks will be recorded on the books of the European Stability Mechanism rather than as national debt, Eurogroup chief Jeroen Dijsselbloem said in Athens on Friday.

The Dutch finance minister met Prime Minister Antonis Samaras and PASOK leader Evangelos Venizelos as well as Finance Minister Yannis Stournaras. Three key issues came up during his meetings: reducing Greece’s official sector debt, the recapitalization of Greek banks and the reduction of taxes.

With regard to an official sector debt haircut, Dijsselbloem said there is no reason to discuss this issue at the moment and that it would not be on the agenda before April next year. He said the reduction would be discussed if Greece produced a primary surplus and stuck to its fiscal consolidation program, which he said was being “successfully implemented” at the moment.

The Eurogroup chief said there were no indications the bailout program, which runs until the end of 2014, would have to be altered, “I see no reason at this time to discuss any lengthening or changing of the program,» Dijsselbloem told journalists. He said that Greece could also consider reducing taxes if it has met its fiscal targets, while taking into account any needs to cover possible financing gaps in 2015 and 2016.

Arriving in Athens a day after Eurostat figures showed economic sentiment in Greece to be at a five-year high, Dijsselbloem was optimistic about Greece returning to growth. “We have the first signals of the return of the economy… for economic recovery next year,” he said.

The Dutch finance minister also arrived as the European Financial Stability Facility (EFSF) released another 7.2 billion euros for the 50-billion-euro bank recapitalization program.

Greece has now received a total of 48.2 billion euros in EFSF bonds and Dijsselbloem did not rule out on Friday the possibility that the final amount will pass over to the ESM. He admitted, though, that the issue of what to do with so-called legacy debt was “very sensitive.” The Dutch official added that a final decision would probably be taken at the June 20 meeting of eurozone finance ministers, when the issue of bank resolution will also be discussed.