Sunday

24th Jul 2016

Germany: No decision on Greece next week

  • 'Greece is not over the worst yet,' says Schaeuble (Photo: World Economic Forum)

A decision on Greece's long-delayed bailout tranche is unlikely to be taken next week, German finance minister Wolfgang Schaeuble has said, as international lenders are still at odds over how to keep Greece afloat in the coming years.

"I am afraid we will not be able to reach a decision on Greece in the coming week," Schaeuble said Thursday (8 November) during a conference in Hamburg.

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He added that despite a key vote in Athens early on Thursday morning approving €13.5 billion worth of spending cuts and reforms, "the worst in Greece is not over yet."

The Greek government has said that if no money comes by mid-November the country will go bankrupt.

A spokesman for the EU commission in Brussels said that while the Greek vote was an "important step" for unblocking the €31.5 billion tranche, the Greek parliament still has to pass the amended 2013 budget on Sunday as a precondition for bailout money to be disbursed.

The spokesman hoped a deal could be reached when finance ministers meet in Brussels on Monday.

But he pointed out that the troika of international lenders still has to issue its long-delayed report on how the Greek economy and debt levels are expected to evolve over the next few years.

The three institutions forming the troika - the Washington-based International Monetary Fund (IMF), the eurozone's central bank and the EU commission - are at odds over how to finance a multi-billion-euro budget gap which emerged this year when Greece held two consecutive elections, delaying privatisation plans. The Greek economy also suffered a worse-than-expected recession.

An extension of the bailout programme by two years until 2016 - as hoped for by Greek Prime Minister Antonis Samaras - is still "out of the question" for Berlin.

The same goes for eurozone governments accepting losses on Greek bonds, a move advocated by the IMF.

This would be against the law in Germany, but also in other countries. One German official noted that the IMF itself would never accept losses on the loans it gives to countries.

Instead, troika officials and eurozone finance ministers will be "scraping the barrel" for extra money which can be freed by lowering the interest rate on the Greek bailout and by extending some short-term financial tools, such as loans for banks backed by Greek treasury bills.

For its part, the ECB has said there is only so much it can do on Greece and pointed out that it already returned its own profits on Greek loans to eurozone states.

"It is up to the governments to decide whether they want to re-use these profits for Greece," ECB chief Mario Draghi said on Thursday at a press conference.

"The ECB is as you say, by and large, done [with Greece]," he said in reply to a journalist.

In the absence of extra money or extra time to meet the bailout deadlines, Greece will most likely have to implement yet more austerity measures. But amid general strikes and mass protests, the IMF has warned that there is a limit to what can be imposed on Greek people.

"Another risk is that austerity may become politically and socially untenable in periphery countries, as structural and fiscal reforms will still take years to complete," the IMF said in a report prepared for the G20 meeting of finance ministers earlier this week in Mexico.

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