Stick & Carrot: EC & ECB work on draft for Greece’s debt relief, but “agreement, first”

The European Commission and the European Central Bank are reportedly working on a draft for a Greek debt relief, in an effort to break the impasse of bailout talks. According to an exclusive story of daily Kathimerini,the draft will be in form of a statement and thus only in case of an agreement between Greece and its creditors.

“A European Union official told Kathimerini on Thursday that the European Commission and the European Central Bank were in the process of drafting a statement regarding debt relief for Greece, in case of an agreement with the country’s creditors. The text would be a renewal of a previous statement regarding debt relief issued at a Eurogroup meeting in November 2012.”

According to some other Greek media information, the draft allegedly contains:

• debt extension to 60 years (i.e. 30 more years)

• reduction in the interest rates

• a chapter dealing with Greece’s obligations to the IMF and the ECB via the ESM.

Information indicates that “the Greek negotiators are aware of the draft that has not been given to them officially.” A verbal “promise” then, just ahead of regular and emergency meetings on Greece?

What it is interesting is that the European official makes reference to “a previous statement regarding debt relief issued at a Eurogroup meeting in November 2012” when now governor of Bank of Greece Yiannis Stournaras was Finance Minister. Even more interesting is that Stournaras made the same reference in his Monetary Policy Report 2014-2015, where he warned on an “uncontrolled crisis” if no agreement with the creditors.

Neither the debt extension nor the payment of IMF and ECB are new ideas.

However it is odd that the information of such a draft is given to the press when the Eurozone Finance Ministers are flocking to Luxembourg for one more Eurogroup meeting. While ECB chief Mario Draghi and IMF head Christine Lagarde are taking part at this Eurogroup, it is not expected to achieve a breakthrough in the Greek bailout talks.

Finance Minister Yanis Varoufakis had recently said that “Greece was not planning to submit a new reforms proposal today as the Eurogroup was not the appropriate” institution to do so, nut the Brussels Group.

According to Kathimerini, European officials have been examining the possibility of an emergency eurozone summit in Brussels on June 25, on the sidelines of a European Council taking place on the same day.

PS It’ss the usual stick-and-carrot tactic with verbal promises nobody keeps. There are times when I am tempted to urge Greece “Stick to the Red Lines,  avoid agreement, drop the payment on June 30th and see how the markets for the eurozone react.”