Friday

22nd Jun 2018

Greek PM to ask for softer bailout terms

Greek Prime Minister Antonis Samaras is next week meeting top EU leaders in a bid to negotiate a two-year deadline extension of the current bailout terms due to the worsening recession.

But patience among eurozone donors is wearing thin.

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  • Drachma banknote - the risk of a greek euro exit is being openly talked about as patience wears thin (Photo: Tonton Bernardo)

Samaras is due to receive Eurogroup chief Jean-Claude Juncker in Athens on 22 August, after which he will travel to Berlin and Paris to meet Chancellor Angela Merkel and President Francois Hollande to lay out why Greece needs two more years to meet the agreed terms, Greek daily Ekathimerini reports.

According to internal documents obtained by the Financial Times, the €11.5 billion worth of spending cuts the government is still struggling to cobble together would be spread over four years until 2016, instead of the 2014 deadline that is currently expected by Greece's lenders.

In order for the plan to work, Greece would need an extra €20 billion to support the budget as the annual deficit reduction in 2013-2014 would be smaller than planned.

But Athens would not seek extra money on top of the €130 billion bailout agreed in March, FT reports, and instead would ask for its repayment of the first bailout it received in 2014 to be postponed until 2020.

In support of his plea, Samaras is likely to invoke the worsening recession - 6.2 percent of GDP according to the latest Eurostat figures published on Tuesday - and its record unemployment rate of over 23 percent.

"The deficit reduction demanded for the period 2013-2014 is excessive. An overdose of austerity is self-defeating," said Iannis Mourmouras, the prime minister's chief economic adviser, according to the FT.

But whether his case will be heard in the German chancellery is doubtful, as leading coalition politicians in recent weeks have floated the idea of a "manageable" Greek euro-exit, a scenario even Jean-Claude Juncker confirmed.

The Greek government is struggling to get by on the first tranche of the €130 billion bailout agreed in March, as the second one is pending a troika report and has been delayed amid political turmoil in Athens and two successive elections.

On Tuesday, it managed to raise a record of €4 billion from its banks - also propped with bailout money - so that it can repay the European Central Bank (ECB) a €3.2 billion debt in bonds maturing on 20 August.

The fact that the ECB refused to extend the deadline on the debt repayment is also an indicator that patience among Greece's creditors is running out.

Words are not enough, Barroso tells Greece

Greece must stop delaying reforms, EU commission president Barroso said in Athens while Greek PM Samaras called on EU politicians to refrain from negative comments, with sceptical statements emerging almost daily from Germany.

Greece running out of cash as talks continue

Coalition partners in Greece have so far failed to agree the details spending cuts required by international lenders to unblock more aid, just as a minister warned cash reserves are drying up.

Greece and creditors proclaim 'end of crisis'

After late-night talks, the Eurogroup agreed on a €15bn disbursement and debt relief measures for Greece, while setting out a tight monitoring when the bailout ends in August.

Greek bailout exit takes shape

At a meeting next week, eurozone finance ministers and the IMF are expected to agree on new cash, debt relief measures, and a monitoring mechanism to ensure that Greece can live without international aid for the first time since 2010.

Opinion

The risks behind the 'green bond' boom

The EU should not overuse the financial system in order to achieve environmental goals, or it risks the emergence of a green bond bubble which would be detrimental to the financial sector and hinder the achievement of climate targets.

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Eurozone needs institutional reform

Both the examples of Greece and Italy test the limits of a system with inherent weaknesses that feeds internal gaps, strengthens deficits and debts in the European South, and surpluses in the European North respectively.

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