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16th Nov 2018

Berlin doubts Greek bailout deal will be reached on time

  • If the bail-out deal agreed in July is not in place on time, another emergency bridging loan might be needed. (Photo: Valentina Pop)

Germany does not believe that a deal on a third bailout for Greece can reached on time for Athens to make its next repayment to the European Central Bank (ECB).

A report in the Bild newspaper on Thursday (6 August) refers to a senior government official as doubting whether an agreement can be reached, and then approved on time by parliaments, including the Greek and German ones, by 20 August.

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  • On 20 August Athens must come up with another €3.5bn to repay debts to the European Central Bank. (Photo: EUobserver)

The official suggest that there might have to be a second bridging loan, similar to the €7.2bn bridging loan that saved Greece from official default on 20 July. This allowed the country to pay back loans to the ECB and the International Monetary Fund.

Greece is due another repayment, of €3.4bn, to the ECB on 20 August. Negotiators have been using this is natural deadline to a wrap up talks on the bailout, worth up to €86bn.

Discussions between Greece and representatives from the European Commission, the ECB, the IMF and the eurozone's bailout fund, the European Stability Mechanism, started in the last week of July.

Both Greece and the European Commission have cast the state of the talks in a positive light.

“We are in the final stretch. Despite the difficulties we are facing, we hope this agreement can end uncertainty on the future of Greece,” Greek prime minister Alexis Tsipras said Wednesday.

“All the reports I am getting suggest an accord this month, preferably before the 20th,” commission president Jean-Claude Juncker told AFP.

But there are several other issues that might derail the process. One concerns the IMF. It is taking part in bailout negotiations but has indicated it won’t participate in the actual bailout until Greece gets some debt relief.

This could make it difficult for the German parliament to pass the deal – as Berlin neither favours debt relief or a bailout without the IMF.

Prime minister Tsipras will also likely have to fight hard to get the deal though the Greek parliament with many members of his left-wing Syriza party opposed the further austerity measures that will come with the deal.

Meanwhile Greece is kept afloat by ECB's emergency liquidity assistance (ELA) programme, which is legally depending on Greek banks being deemed solid.

But Greek bank shares plunged for a third day on Wednesday, after the end of a five-week shutdown sparked the biggest stock market drop on record.

The European Central Bank is to carry out a comprehensive assessment of Greek banks, it said in a letter sent to the European Parliament and released on Wednesday.

ELA is run through Greece’s central bank but subject to approval by the ECB’s governing council. In a conference call on Wednesday the bank governors decided to keep the cap of emergency lending to Greek banks at €90.4bn for the next two weeks.

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