Wednesday

26th Sep 2018

Creditors put more pressure on Greece

  • The EU and the IMF "have encouraged" Greece to "accelerate the work", Eurogroup president Jeroen Dijsselbloem said. (Photo: Council of the EU)

Two years after a crisis that led Greece to the brink of leaving the eurozone pressure from creditors is again mounting, this time to adopt austerity measures or see the end of the bailout programme.

Eurozone ministers have asked the Greek government to present measures ensuring budget targets set for 2018 and the following years will be respected.

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  • IMF's Poul Thomsen (l) and Delia Velculescu (r). The fund's presence is "not negotiable at this point".

EU finance commissioner Pierre Moscovici said after a Eurogroup meeting on Thursday (26 January) that a "global agreement" was needed, that includes "a mechanism to reassure all stakeholders about Greece's commitment for budgetary seriousness after the end of the programme".

These additional measures are required by the International Monetary Fund (IMF) as a condition to remain in the programme and were endorsed by the EU.

The IMF is also needed to conclude the second review of the programme, agreed in 2015, running until 2018. An agreement on the review would unlock a new tranche of financial aid for Greece.

Eurogroup president Jeroen Dijsselbloem said that the IMF's presence in the programme was "not negotiable at this point".

The creditor institutions - the IMF, the European Commission, the European Central Bank and the European Stability Mechanism - asked the Greek government to design further measures on the labour market, pensions and tax that would guarantee that it reaches 3.5-percent primary budget surplus required by the bailout programme.

"We have encouraged them to accelerate that work," Eurogroup president Jeroen Dijsselbloem said after the meeting, adding that "a quick finalisation of the second review is in everyone's interest". But Greece and its creditors did not make much progress on Thursday.

Greek finance minister Euclid Tsakalotos came to Brussels with two letters outlining proposals, but creditors said they were insufficient. As a consequence, the creditors' experts can still not go back to Athens to prepare the second review agreement.

About a third of the review's requirement have been dealt with and another third will be "in the coming weeks", Dijsselbloem explained, adding that "the last ones are always the hardest".

One roadblock, in addition to the extent of the measures demanded by the IMF, is whether the Greek government should pass them through parliament now to be implemented when needed, or just commit to acting on them if the deficit goes off track in 2018 or after.

'Not reasonable'

French minister Michel Sapin told journalists that asking Greece to legislate new austerity measures as a precondition was "not reasonable" because Tsipras was "politically not able to do that".

"It is legitimate to ask to describe what measures he [Tsipras] would take, but it is not useful and may be politically negative, to ask him to legislate," Sapin said, implying he was almost alone in making that point.

Moscovici told EUobserver that he hoped all parties would soon agree on the conditions of the mission's return to Athens, in order to prepare a deal for the next Eurogroup on 20 February.

EU officials are concerned that the February meeting is the last opportunity to find a political agreement before election campaigns in Netherlands, France and Germany this year.

Yet Greece is facing another deadline in July when a series of loan repayments come due.

The Greek government and its prime minister Alexis Tsipras are now under pressure.

Sources told EUobserver that all now depends on how Athens and the Washington-based institutions break the deadlock.

"It's mainly an IMF-Greece thing," an EU source noted, adding that EU institutions could not do much more in the meantime.

'Everyone must stay calm'

"It's up to Tsipras to realise that he cannot lose more time," an EU official said.

An official with knowledge of the talks admitted that the Greek PM was facing a low-intensity version of 2015 when he was almost pushed out of the eurozone after trying to change the conditions for the bailout.

Another official, also close to the discussions, said that even if negotiations with the IMF were hard, "everyone must stay calm".

The IMF is demanding more austerity measures because it says that the budget targets set by the bailout programme cannot be met and that the Greek debt will remain unsustainable. IMF rules don't allow it to participate in programmes in countries whose debt is unsustainable.

Greek debt will reach 160 percent of GDP in 2020, compared to 179 percent expected this year, but will become "explosive" after 2030, according to IMF documents leaked in Greek media during Thursday's Eurogroup meeting.

According to the 2015 programme, the second review should have been closed a year ago, but discussions on the first review, closed last May, and the current one have run late because of disagreements on additional austerity measures and debt assessment.

"You can copy-paste your articles and just change the day," a jaded diplomat said on Thursday.

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Watchdog urges creation of EU bad bank

EU growth is being held back by more than €1 trillion of bad loans, its banking regulator said, comparing the eurozone to 1990s Japan.

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