Tuesday

31st Mar 2020

Euro-ministers and IMF in third attempt to agree on Greece

Eurozone finance ministers and International Monetary Fund chief Christine Lagarde are having a third attempt on Monday (26 November) to agree on how to keep Greece afloat and unblock its long-awaited bailout tranche.

At the core of the debate is how to decrease Greece's debt from 190 percent of GDP to 120 percent over the next eight to ten years and how to bridge a multi-billion-euro funding gap that has emerged due to worsening recession and political delays.

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  • Third time lucky? Greece awaits the international creditors to unblock its bailout money (Photo: asterix611)

The IMF insists eurozone governments should accept losses on their Greek loans - so-called Official Sector Involvement (OSI). Germany and a few other countries have argued against saying that as long as the current bailout programme is ongoing, it would be against national and EU law to give loans and at the same time accept losses.

But since the programme ends in 2014, there would be no legal impediment for OSI the following year. According to the German newspaper

Welt am Sonntag, ministers discussed this option last week during a secret meeting in Paris one day ahead of a second Eurogroup which ended in disagreement.

Der Spiegel on Monday also reported that both the IMF and the European Central Bank - Greece's other creditor - are still insisting governments give up half of their Greek claims.

Germany continues to oppose this option. Instead it wants to shift the attention to the "immediate" funding needs - the disbursement of the tranche and filling the funding gap through a bond buying scheme possibly funded by the eurozone bailout fund to the tune of €10 billion.

Lowering the interest rates on the Greek loans is also on the table, but that would raise the question of why other bailed-out countries - Ireland and Portugal and Spain for its banking sector - have to pay more.

"I'm against this write-off and I want to find another solution," German Chancellor Angela Merkel said Friday after an EU summit dedicated to EU budget talks.

Ministers and the IMF are under high pressure to agree, as the Greek government is losing credibility after forcing through highly unpopular spending cuts only to see its bailout tranche further delayed by quarrels among creditors.

Greek Prime Minister Antonis Samaras on Friday said his EU peers during the summit had recognised it is no longer "Greece's fault."

“We now have some strong supporters. The talks will go on right up to the last minute (on Monday)," he said.

A total of €44.5 billion are to be disbursed by the end of the year, if the Eurogroup agrees on Monday. Preparatory talks took place on Saturday, with ministers sounding cautiously optimistic afterwards.

"I think that in effect we are very close to a solution," French finance minister Pierre Moscovici told BFM television on Sunday. "I don't know if there will be an agreement tomorrow, I know it is possible and I want on," he said.

A third failure to agree would be "irresponsible, given the efforts everyone has made," he added.

One EU source told this website that there will most likely be a deal for the disbursement of the tranche, but the language would be "incomprehensible" and any debt restructuring deal would not be publicly announced.

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