Monday

6th Jul 2020

Finance ministers fail to decide bridge financing for Greece

  • "All options to provide Greece with emergency cash "are quite difficult", said Commission vice-president Dombrovskis (l) and Luxembourg finance minister Pierre Gramegna (r) (Photo: Council of the EU)

EU finance ministers agreed on Tuesday (14 July) to deepen and strengthen the European monetary union but failed to make progress on the urgent issue of bridge financing for Greece.

"Different options are (being) explored" to provide Greece with up to €7 billion before next Monday (20 July), EU Commission vice-president Valdis Dombrovskis said after the Ecofin meeting of 28 ministers.

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"It has to be said that pretty much all options are quite difficult, with legal, political or financial complications," he said.

The money is needed to get Greece through the coming weeks, including covering the €3.5bn owed Monday to the European Central Bank (ECB).



Using money from the European Financial Stabilisation Mechanism (EFSM) is the most controversial option.

Sweden, Denmark, the Czech Republic and the UK voiced their opposition to the idea because the EFSM is guaranteed by all 28 EU member states, not only eurozone countries.

"The eurozone needs to foot its own bill," said Britain's chancellor of the Exchequer George Osborne.

Other solutions include the use of profits on Greek bonds made by the ECB and national central banks and bilateral loans to Greece.

German finance minister Wolfgang Schäuble, for his part, proposed that Greece issues IOUs to pay its domestics bills and save money to repay its debt.

This solution would be tantamount to start creating a parallel currency to the euro.

A working group of experts have been tasked "to find out a proper mechanism", Dombrovskis said, but no date for a decision by finance ministers has been set.

EMU

Speaking a day after euro leaders agreed conditions for a new Greek bailout, he noted that "market reaction has been so far quite limited beyond Greece".

"Thanks to the existing tools of banking union and ESM we were able to handle the Greek crisis in an efficient way," said Luxembourg's finance minister Pierre Gramegna, whose country holds the six-month presidency of the Council,

During their meeting, the ministers discussed the "five presidents" report on "Completing Europe's Economic and monetary union (EMU)" published in June.

"There is an objective need to strengthen the EMU. We can see that we need to deepen cooperation," Gramegna said.

He asked for "concrete proposals by the Commission very quickly" and said treaty changes were expected to implement medium and long term proposals from the report.

"But it is important to implement what has already been agreed," he said.

He underlined the fact that all member states had to implement the directive on bank recovery and resolution and that the microeconomic imbalance procedure should be strengthened.

He also pointed out that member states should "not neglect the social dimension of the EMU which is key to (its) acceptance amongst our populations".

Romania singled out

The Ecofin also issued country specific recommendations on member states economic, employment and fiscal policies.

Along the lines set out by the Commission in March, the recommendations focus on investment, structural reforms and fiscal discipline.

"This year's recommendations are streamlined and more focussed," Dombrovskis said.

Romania was singled out during the meeting.


"It is regrettable that the review of Romania's balance of payments programme could not, once again, be concluded," Dombrovskis said.

"It is very important that Romania continues to implement the needed reforms and that the country ensures sound fiscal policies."

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