2nd Apr 2020

Euro ministers meet on Greece in toxic atmosphere

Friday’s (14 August) Eurogroup meeting on the Greek bailout could see Germany push for tighter conditions and clash with the International Monetary Fund (IMF) on debt relief.

Meanwhile, the Greek Parliament, on Friday morning, approved the bailout agreement and the required prior actions after almost 24 hours of discussions, which exposed the ever-deeper rift in Greek PM Alexis Tsipras' coalition.

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Two hundred and twenty two MPs voted Yes, 64 voted No, including 32 from Tsipras' own party, while 11 abstained.

The Vouli debate went on all night, with heated exchanges between MPs and with the parliament speaker, Zoe Konstantopoulou, trying to delay the vote to Friday afternoon through procedural manoeuvres.

"I am not going to support the prime minister any more”, Konstantopoulou, a representative of Syriza's left wing, said in an indication of what could be a definitive split in the party.

Tsipras told MPs the choice was between "a memorandum with the euro or a memorandum with the drachma”.

He also warned them that German finance minister Wolfgang Schaeuble would try to take back the up-to €86 billion aid which Greece had managed to negotiate if they did not vote in time for the Eurogroup event.

'Partially compliant'

Germany had already voiced skepticism on the technical EU-Greece accord reached on Tuesday, and Schaeuble is expected to push for new conditions at the Eurogroup.

A document from the German finance ministry leaked by Green MEP Sven Giegold indicates Schaeuble will say the memorandum of understanding (MoU), which outlines reforms to be implemented during the three-year bailout, does not meet all the conditions agreed at July’s euro summit.

"Large parts of the summit statement including the prior actions from the aide-memoire are included in the MoU. However, the implementation of many measures is foreseen not before October/ November, and some very important reforms will not be implemented yet and are not yet specified”, the leaked document notes.

According to the German ministry, the MoU is only "partially compliant" with the euro summit accord on issues like the reform strategy, fiscal targets, or public administration, and is “largely compliant" on labour market and pension reforms.

On public administration reform, Schaeuble's ministry thinks the MoU is "repeating and weakening the summit language".

The ministry also thinks the MoU is "not yet compliant" on the privatisation fund demanded by Germany to manage Greece's assets, nor on debt sustainability.

Debt relief

“Three key questions to be clarified now”, the document adds, using language that could herald difficult talks at the Eurogroup event.

"First : Does IMF fully subscribe to the conditionality (no split in conditionality between ESM and IMF)?”, it asks, referring to the European Stability Mechanism, the eurozone fund that will provide the bulk of the bailout.

"Second: How can debt sustainability be ensured (hint to debt relief later on is not convincing)? And third: Can the independent privatisation fund rapidly start working and also take over the Greek banks together with recapitalization of up to €25 billion (ensuring governance standards as with direct recap)?”.

While Germany insists that the IMF should participate in the third bailout, Berlin and the Washington-based institution are at loggerheads over debt relief.

Germany and the IMF agree Greek debt is unsustainable.

But Germany is opposed to any haircut and insists on fiscal discipline, while the IMF has repeatedly said it would not participate in the bailout unless Greek debt is restructured.

In a statement on Thursday, the IMF said it "look[s] forward for Greece’s European partners to make decisions on debt relief that will allow Greece’s debt to become sustainable".

It added it would "make an assessment of its participation in providing any additional financing to Greece once the steps on the authorities' programme and debt relief have been taken, expected at the time of the first review of the ESM programme”.

The European Commission also entered the new debate on Thursday.

In a series of messages posted on Twitter, commission president Jean-Claude Juncker's chief of staff, Martin Selmayr, noted that EU treaties say IMF involvement is "wherever appropriate+possible" and asked if debt relief "is what all 19 €Member States want”?

If the bailout is not approved in time for 20 August, when Greece has to repay a €3.2 billion loan to the European Central Bank (ECB), the EU could agree on bridge-financing instead.

According to German tabloid Bild, Greece would, in this case, receive €6.04 billion over a three-month period.

This option has the support of Germany, but is rejected by Tsipras.

"It would be a return to a crisis with our end," he told Greek MPs on Thursday.

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