Saturday

23rd Jun 2018

More pressure on Greece as EU finance ministers meet

  • The Greek funding saga appears to be going on without end (Photo: DimitraTzanos)

Finance ministers are meeting in Cyprus to put more pressure on Greece to implement promised budget cuts, so that bailout payments can resume in November.

The informal meeting of finance ministers taking place Friday and Saturday (14-15 September) in Nicosia was originally expected to be a "huge event", with Greece's troika report and a possible Spanish request for more financial assistance to be dealt with.

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None of that is now expected to happen. The troika of international lenders (European Commission, European Central Bank and International Monetary Fund) has just started its mission in Athens, where there is still no final agreement on the €11.5bn worth of spending cuts that had to be implemented by end of June.

The Greek programme is "massively off track" as one EU diplomat put it, and Greece will need more money this year than planned, but no member state, be it Germany, Netherlands or France want to hear about a third bailout.

Instead, what EU officials in Brussels expect is that the troika will "fudge" the report so that payments from the €130bn bailout can resume in November and possibly in bigger tranches this year to fill the billions-strong gap that has emerged amid worsened recession, fewer tax revenues and privatisations than expected.

"The bailout money is stretched over the next two years, until 2014, so they could pay more this year and less in the coming years, as long as there is no extra money involved, it's fine," one EU source told this website.

Der Spiegel reported on Monday that German Chancellor Angela Merkel is increasingly of the view that it is better that the troika not shed too close a light on the state of Greece's finances.

With general elections coming up in autumn 2013, Merkel cannot politically afford to have the idea of a third bailout be seriously discussed and would rather have the troika embellish the report and find a way to frontload payments this year to keep the country afloat.

But the Washington-based IMF is reluctant to sign off the plan. The only agreement that seems to emerge so far is to delay the troika report until after the 6 November, when President Barack Obama stands for re-election.

Spain and banking union

Meanwhile, ministers in Nicosia are likely to have a first look at the banking union plans unveiled by the EU commission putting the ECB in charge of supervising banks in the 17 euro countries. With central bank governors present at the meeting, they will discuss the practicalities of how to move from the current, national-based system to the new centralised one.

"It would be a disaster if we missed this transition, especially since we are still in an economic crisis," one EU diplomat told several journalists in Brussels on Wednesday.

As for Spain, with the ECB having announced a bond-buying scheme that could help lower its borrowing costs, market pressure has been alleviated for the moment. "We don't expect any request from Spain," another EU official said earlier this week.

EUobserver understands that France is still pressuring Spain to ask for financial aid, but the centre-right government of Mariano Rajoy is wary of filing a request in the absence of a firm commitment from Germany that it would approve it.

Merkel is wary of going to the Bundestag to ask it to endorse another Spanish programme, after the €100bn agreed in June for its banks.

Greece should get more time, France says

France is in favour of giving Greece more time to meet its bailout conditions. Meanwhile, German media says there are plans to increase the EU bailout fund to €2 trillion.

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.

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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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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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