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21st Jan 2022

Greece's €2bn payment remains blocked

  • Eurogroup president Dijsselbloem (l) and Greek finance minister Tsakalotos (r): Eurozone ministers will not decide to unblock tranche of aid. (Photo: consilium.europa.eu)

This Monday's (9 November) Eurogroup is unlikely to unblock a €2-billion tranche from Greece's bailout, after weekend talks between the Greek government and creditors did not bridge differences on reforms.

The two sides remain divided on the issues of home foreclosure and repayment of fiscal arrears by individuals.

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Greece's creditors - the EU, the European Central Bank, the European Stability Fund, and the International Monetary Fund - want to lower the level of protection under which owners who do not pay their mortgages can have their house seized.

They also want to tighten the so-called 100-installment scheme for repayment of arrears to the Greek treasury. Under the scheme, Greeks can repay their debt to the state in 100 separate payments.

Creditors demand that someone who misses a payment is expelled from the scheme, while the Greek government wants a 25-day grace period.

Vicious circle

The issues are symbolic for both sides.

For creditors, foreclosures are part of an effort so solve the issues of non-performing loans, which are one of the main reasons for the weakness of the Greek banking sector. A recent report by the ECB evaluated at €107 billion the amount of non-repaid loans.

The 100-installment scheme has to do with improving Greek state revenues after years of administrative and fiscal disorganisation. According to Greek authorities, individuals and businesses owe €72 billion to the state and pension funds.

But the Greek government says creditors' demands are socially explosive.

"We are committed to implementing the programme fully and credibly," a Greek government official said last week. "But we need political stability. And the precondition for political stability is social cohesion."

"The programme will not be viable if it doesn't take into consideration the level of tolerance," the official said.

"We have to be careful not to go beyond common sense," the official added, suggesting creditors' demands were unreasonable.

Seizures will cause social unrest and could boost the neo-nazi Golden Dawn party, the Greek official noted.

The official also pointed out Greek banks are opposed to auctions of seized houses, as they would have a negative impact on market prices and banks' assets.

Although the Greek and EU sides insist discussions are a normal part of the process, impatience is growing in Brussels.

Political test

With the €2-billion tranche delayed and issues still unresolved, the programme is 3 weeks behind schedule and will delay other processes, such as the bailout's first review and bank recapitalisation.

"This is the first big political test," an EU official said last week. "We want to ensure that delivery is working and there is a break with the past practice of repeated delays."

Unless there is a breakthrough in the meeting of finance ministers this Monday in Brussels, discussions between officials will resume on Wednesday, a day before a national strike in Greece that will stress the social difficulties.

On Sunday, prime minister Alexis Tsipras called European Commission president Jean-Claude Juncker, as well as German chancellor Angela Merkel and French president Francois Hollande, about the migrant situation and the bailout talks.

With the hard-fought bailout risking going off-track, the challenge of the migrant crisis, with Greece having received more than 600,000 migrants this year, adds a dangerous twist to the situation.

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