Wednesday

31st Aug 2016

Greece should get more time, France says

  • Athens is at least €20 billion short (Photo: Aster-oid)

France is in favour of giving Greece more time to meet bailout conditions, provided it is "sincere" on implementing reforms, French Prime Minister Jean-Marc Ayrault has said.

"We can already give it more time to pull through," he said in an interview with the Mediapart website on Sunday (23 September). He added that a Greek exit from the eurozone "cannot be the solution."

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But he also said Athens should be "sincere in implementing reforms, including fiscal ones."

The Greek coalition government, led by centre-right leader Antonis Samaras, has still not managed to agree the €11.5 billion worth of spending cuts that were due at the end of June, with the junior coalition partners resisting further pension and wage cuts.

Ayrault said he had talked to the leader of the Social Democrats (Pasok), Evangelos Venizelos, about the country's attempts to overcome what is now a three-year long financial disaster.

"Those who have a lot of money in Greece invest in housing abroad. It's all immoral. The Greek crisis is structural, but also political," Ayrault noted.

Two rounds of Greek elections in spring as well as political squabbles have helped to create a funding gap of at least €20 billion, on top of the promised €11.5 billion in spending cuts, Der Spiegel magazine has reported.

The so-called troika of international lenders (European Commission, European Central Bank and International Monetary Fund) will only approve the disbursement of the next €31 billion tranche if the €20 billion gap is filled.

On Friday, the troika suspended its mission and said it will come back to Athens in a week's time.

"During this period some mission experts will remain in Athens to assist the authorities with further technical work, while contacts will continue with the authorities from respective headquarters," the commission said in a statement.

It gave reassurances that the "brief pause" did not signal any trouble and that discussions since early September had been "productive."

The delay could be politically motivated to allow the US presidential elections on 6 November to take place without bad news from Greece that could send shockwaves through international markets.

Greece is not alone

Meanwhile, speculation about Greece's eurozone future continues.

Swiss banking giant UBS has estimated a "likelihood of over 50 percent" that Greece will leave the eurozone next year. And it does not rule out that other euro countries may follow.

Portugal last week ran into trouble over a contested austerity measure linked to its €78 billion bailout when 1 million people took to the streets and the government coalition almost collapsed over the issue.

The government has since indicated it may repeal the measure, but it will need to come up with something similar in order for the troika to approve its next tranche of bailout money.

Spain is reportedly negotiating a second bailout after having already secured €100 billion in June for its banking sector. Financial Times Deutschland on Monday wrote of an "XXL package" to be agreed in November including a second bailout for Spain, more time for Greece and a fresh bailout for Cyprus.

Separately, Der Spiegel quoted unnamed officials saying there are plans to increase the eurozone's €500bn bailout fund (ESM) to €2 trillion.

The way to do it, according to the German magazine, would be to repeat the failed experiment with the temporary bailout fund (EFSF) of finding investors in China and elsewhere who would put money into a "special purpose vehicle."

The plan is supposed to work this time because the ESM - due to come into force on 8 October - will be a permanent fund and have a larger firepower than its predecessor.

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