Finance Minister Tonio Fenech told Parliament yesterday that Malta would absorb the reduction from its creditor’s share in the waiving off of the Greek debt. Profits from the European Central Bank would compensate for the relative reduction in interest.
Official creditors agreed to waive off €1.4 billion from the Greek debt. The ECB would share its profits from the bond portfolios with the national central banks. These profits would eventually be given to governments as revenue. The ECB and the national central banks would lose nothing from their Greek holdings.
Mr Fenech was briefing the House after attending a Eurogroup meeting in Brussels which, in the early hours of Monday, agreed to a second bailout for Greece amounting to €130 billion. Malta had to provide €74.5 million in tranches over a three-year period under the first €80 billion bailout. He declared that the agreement showed a clear sign of strength from the eurozone, which was also in Malta’s interest.
Minister Fenech said that creditors would reduce the Greek debt by €107 billion representing 53.5 per cent of all debts to avoid the collapse of the Greek economy. This meant that the Greek debt, as part of its GDP, was to be reduced from 164 to 120.5 per cent by 2020. This also satisfied the demands of the International Monetary Fund (IMF) to participate in the bailout.
The Greek government approved austerity measures amounting to €325 million for this year. It also agreed to be placed under permanent surveillance by an increased European task force on the ground under a programme which included comprehensive measures. The leaders of the two coalitions in Greece guaranteed to commit themselves to this agreement.
Answering questions by Labour spokesmen Charles Mangion and Karmenu Vella, Mr Fenech said that the second bailout aimed at giving Greece the chance to recover. It required Greece to affect economic structural reforms and to embark on privatisation for stimulating economic growth.
The second bailout was not a blank cheque. It would not be activated if the Troika alerted the Commission that Greece was not implementing the agreed programme. The agreement did not only contemplate austerity measures. The country had to curb its expenses.
The loan to Greece would not be used to bailout banks which suffered a substantial haircut of 75 per cent. The bailout would be used to finance the Greek government’s annual budget.
Minister Fenech also said that the European task force in Greece would ensure the implementation of the agreement and provide technical assistance in such sectors as taxation and privatisation.
He said that the eurogroup ministers were confident that the main political parties would honour their commitment, adding that it was difficult for a situation to arise where a small political party in next year’s elections could change the situation.