ESM’s Regling : Grexit was not a scenario we are working with
The head of the European Stability Mechanism (ESM) Klaus Regling on Wednesday appeared confident that the ESM will not be greatly affected by the results of upcoming elections in Greece, despite having massive holdings in Greek debt.
In an interview with the Slovenian newspaper “Delo”, Regling admitted that the EFSF and ESM currently owned 45 pct of Greece’s public debt and were due to take on more if things go according to plan. He pointed out, however, that more than 80 pct of the previous Parliament had voted in favour of the programme, which had the support of all parties.
“For me it is not so important who is in the next government….We are happy to work together with any future government in Greece,” he said, though stressing that stalled reforms must continue as quickly as possible after the elections.
Asked if Grexit was still on the cards, the ESM chief did not rule out the possibility in theory, while stressing that “it was not a scenario we are working with.” He also rejected suggestions, such as those made by Paul Krugman, that Greece might recover more quickly outside the euro.
“We believe we know better what works in Europe and what doesn’t,” he said, pointing out that the painful austerity measures taken by Greece were yielding their first benefits in 2014, which saw a tentative recovery.
“Growth returned in 2014. It was the first year of positive growth after five years of negative growth; unemployment also began to fall last year. And Greece was also able to return to the market with two bond issues. There was progress with reforms and with the economic situation. All this was interrupted during the first half of this year. But now I think Greece is back on track. The government has made very clear commitments,” he added.
Commenting on the IMF’s proposals for Greek debt relief, Regling said the IMF was not seeking a nominal haircut of Greek debt. He said other debt relief measures might be considered if the programme was implemented as agreed and suggested that the IMF was considering coming on board in November.
“They are looking for more details on fiscal adjustment, on pension reform and they want additional debt relief. In the view of the IMF, that is necessary. Again, not haircuts, but debt relief. And as I’ve said, the Eurogroup will consider that, and then I am quite confident that the IMF will be part of the programme later this year,” he said.