Draghi says reform implementation must come before debt restructuring

The Greek government must focus on ownership of its bailout program and then seek debt relief, which is also necessary for the country, European Central Bank President Mario Draghi has told Sunday’s Kathimerini.

In an interview, Draghi said that “strong ownership” of the program, Greece’s third since May 2010, and “determination” to implement it on the part of Prime Minister Alexis Tsipras and his two-party coalition will be vital in the months ahead.

Draghi said that implementing the structural reforms that Greece’s lenders have asked for would lead the country’s economy back to growth. The ECB chief said it is vital that the government does not cast doubt on the program’s targets. He welcomed Tsipras telling his cabinet that their goal must be to implement the measures without delay and ensure that Greece passes the upcoming first review carried out by the institutions.

“The Greek government will have to show that it has assumed ownership of the program and that it is determined to fulfill its requirements,” said the central banker.

Draghi added that another key element over the coming months is the discussion about Greek debt sustainability. He said the ECB has already expressed concern about whether Greece’s debt is sustainable. He suggested that an “element” of debt relief would be needed.

On Friday, the head of the International Monetary Fund’s European department, Poul Thomsen, indicated that the Washington-based organization would be seeking a significant reduction in Greece’s debt if it is to be part of the third program.

“We think that Greece cannot deal with its debt without debt relief,” Thomsen said at an IMF meeting in Lima. “Greece cannot deal with debt just through reforms and adjustment.”

European sources suggested to Kathimerini that any restructuring of Greek debt would not be front-loaded but would be linked to the continued monitoring of the Greek economy beyond the end of the current program, which runs until the summer of 2018.

This reflects fears in some euro-area countries that if Greece is granted debt relief before the program ends then its politicians will become less responsible once outside monitoring also stops in three years.