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25th Aug 2019

Greece to request 'loan extension', but questions remain

  • Greek PM Alexis Tsipras remains defiant when speaking in the national parliament (Photo: consilium.europa.eu)

The Greek government on Wednesday (18 February) is expected to make a request for the eurozone to extend its 'loan agreement', but questions remain as to whether they will stick to the commitments attached.

Talks between Greece and eurozone finance ministers broke down on Monday with an ultimatum that Athens by Friday should ask for an extension of the current bailout programme which runs out next week.

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Greek finance minister Yanis Varoufakis said he would have been willing to sign off on a proposal made by the EU commission, which was more accommodating to Greek demands, but that the Eurogroup offer - to extend the bailout programme by six months - was unacceptable.

The battle is about more than just semantics.

EU officials say Greece cannot cherrypick only the money-part of a bailout and ignore the structural measures that have to be implemented to get the cash.

"If they ask for an extension, the question is, do they really mean it. If it's a loans extension only, with no commitments on reforms, there is an over 50 percent chance the Eurogroup will say no," one EU official said.

Failure to agree by Friday would leave very little time for national parliaments in four countries - notably Germany - to approve the bailout extension. It would mean Greece would run out of money and be pushed towards a euro-exit.

EU officials say would it be "much more difficult, but not impossible" for eurozone ministers to agree on a new loans facility from the European Stability Mechanism (ESM) for Greece if the bailout expires and there is still no deal.

But that new money pot would also require parliamentary approval.

"And even if the extension is approved, the problem is just delayed. In the end, there will have to be a third programme for Greece," the source concluded.

Greece has so far contracted €240 billion in loans from the EU and the IMF, which has sent its debt above 175 percent of its gross domestic product.

Back in Athens, Prime Minister Alexis Tsipras, who was elected on an anti-austerity platform last month, held a fiery speech refusing to be "blackmailed" and promising to raise the minimum wage and to roll back some of the labour market reforms passed by the previous government as part of the bailout agreement.

According to participants at last week's Eurogroup, the Baltic states and Slovakia made the point that their minimum wage is lower than Greece's and that it would be very difficult to sell a further Greek hike to their citizens back home.

German finance minister Wolfgang Schaeuble, who has attracted most of Tsipras' criticism for allegedly blocking a deal with Greece, said Tuesday on ZDF: "It's not about extending a credit programme but about whether this bailout programme will be fulfilled, yes or no."

Jeroen Dijsselbloem, the Dutch finance minister who chairs the Eurogroup, also warned Greece that the ball is in their court.

"It's really up to the Greeks. We cannot make them or ask them. We stand ready to work with them, also (over) the next couple of days," he said Tuesday on his way out of a meeting of EU finance ministers.

As for the prospect of letting Greece face bankruptcy to really understand what's at stake, an EU official said "there is no willingness, but there is readiness to do it".

EU leaders avoid clash with Tsipras

EU leaders on Thursday steered clear of confrontation with Greek PM Tsipras, deferring hard talks on Greece's bailout to ministers on Monday.

Greece caves in, Germany plays hardball

The Greek government on Thursday submitted a request to extend the current bailout programme by six months, but Germany rejected the demand on the eve of a meeting of eurozone finance ministers.

Greece to get four extra months under current bailout

Greece has agreed to all the conditions laid out by Germany and is likely to get its bailout programme extended by another four months, provided international creditors give a green light on Monday.

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