Friday

5th Mar 2021

Troika in Greece amid renewed euro-exit talk

  • Greek PM Samaras is under pressure to deliver on promised spending cuts (Photo: European People's Party)

Officials from the troika of international lenders are back in Athens on Tuesday (24 July as the three-party government struggles to meet the spending cuts demanded in return for the bailout money.

The Greek government is several months behind on promised spending cuts and privatisations. The auditors from the EU commission, European Central Bank and International Monetary Fund are set to draw up a report on how big the shortfall is and whether Greece can still receive the next tranche of €31.5 billion in September.

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Without this money, the Greek authorities will not be able to repay outstanding debt to the eurozone central bank, or salaries and pensions in the coming months.

Development minister Costis Hatzidakis on Sunday warned that the two months ahead are "the most critical" and that his country is in a "state of emergency."

"If the current government fails, the next one will be a government of the drachma," Hatzidakis told Ethnos daily.

The government, led by Conservative leader Antonis Samaras, took two elections and at least three months of stalled reforms to come together.

The troika further postponed its mission as Samaras was rushed into a hospital to undergo eye surgery and his first pick for a finance minister refused to take up the job amid health problems.

The current finance minister, Yannis Stournaras, an Oxford-educated economist, has so far come up with only about €8 billion in spending cuts out of the €11.5 billion which should have been identified in June. Initially, the Samaras government had hoped to negotiate an extension of at least two more years in meeting the bailout requirements, as the economy is shrinking faster than forecast.

State income is over €1.5 billion short of the predicted revenues in the first half of this year, the finance ministry said last week. And privatisations of state assets, which should have brought in €3 billion this year, are only expected to reach a tenth of that target, according to the head of the privatisation fund, Costas Mitropoulos, who resigned last week, citing lack of support from Samaras.

"Right now we need to secure an at least tolerable troika report by the end of August," finance minister Stournaras told financial daily Imerisia on Saturday.

He admitted that a deadline extension, as first envisaged by the Samaras government, "cannot be taken for granted."

"Everything is under negotiation and unfortunately, much of what was agreed is not in an implementation phase," the minister said.

Three German ministers over the weekend warned that there is no way around more spending cuts and sticking to the bailout terms, with finance minister Wolfgang Schauble warning that Greece must "make up for any delays."

Schauble told Bild newspaper there were no similarities between Greece and Spain, who recently obtained longer deadlines in meeting its deficit targets.

Economy minister Philipp Roesler meanwhile did not hesitate in floating the Greek euro-exit scenario again.

“What’s emerging is that Greece will probably not be able to fullfil its conditions. If Greece doesn’t fulfill those conditions, then there can be no more payments,” he told ARD broadcaster on Sunday.

He said that an end of the bailout would lead Greeks to conclude "that it is perhaps smarter to leave the eurozone".

"I think for many experts, for the FDP, for me, that an exit by Greece from the eurozone lost its horror a long time ago."

German foreign minister Guido Westerwelle also said in an interview with Hamburger Abendblatt that his liberal party - the junior coalition member to which Roesler also belongs - will never agree to Greek attempts to water down the bailout terms.

“That won’t work, that’s a Rubicon we can’t cross,” Westerwelle told the newspaper, even though last month he said Athens could hope for better terms as its economy was worsening.

But the feeling that Greek politicians are simply not sticking to what they promise has worn down any sense of patience among German politicians.

In addition, Der Spiegel on Monday reported that the IMF is considering withdrawing from any extra payments to Greece.

If Greece manages to secure extra time for its reform programme, the German magazine said, this would likely boost the total bill by a further €10-50 billion in bailout money.

If the IMF pulls out, other eurozone countries are also likely to stop paying. Finland and the Netherlands have linked their contributions to IMF participation.

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