Sunday

24th Sep 2017

Greek bailout talks to 'intensify'

  • Greek finance minister Tsakalotos will stay in Brussels for talks with creditors. (Photo: Council of the EU)

Greece and its creditors decided on Monday (20 March) to "intensify" talks to agree on reforms needed to unblock a new tranche of financial aid, amid concerns over the country's economic situation.

The talks will take place in Brussels this week. They will involve representatives from the creditor institutions - the European Commission, the European Central Bank, the European Stability Mechanism (ESM) and the International Monetary Fund (IMF) - and from the Greek government, including finance minister Euclid Tsakalotos.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Eurogroup president Dijsselbloem: "No promise that all the work will be done in time" for a political agreement in April. (Photo: Council of European Union)

Talks could last two or three days, according to a source that will be involved, who added that "the number of issues is not so big that we need longer than that".

The conclusion, agreed in 2015, of the second review of the bailout programme, has been blocked for several months. The main obstacles are the reforms of the labour market and of the pension system, as well as the fiscal targets that need to be reached after the end of the programme in 2018.

In total, the Greek government needs to adopt measures that will cut spending by €1.9 billion and increase revenues by €1.9 billion.

When a so-called staff level agreement between the Greek government and the institutions is reached, eurozone finance ministers will have to approve it in order to unblock a new loan - the amount of which is still unknown.

"There is a strong agreement and a strong will between all parties involved to finish the remaining issues as quickly as possible," Eurogroup president Jeroen Dijsselbloem told reporters after a meeting of eurozone finance ministers in Brussels.

He added however that there was "no promise that all the work will be done in time" to reach a political agreement at the next Eurogroup meeting on 7 April.

The conclusion of the second review, which should have been reached more than a year ago, depends on an agreement between Greece and its creditors, but also largely on an agreement between the creditors themselves.

IMF demands

The political agreement over a new loan will have to include the IMF, which has been insisting on further budget cuts from the Greek government in order to reach the fiscal targets set in the bailout programme.

The IMF considers that the target - a 3.5-percent of GDP primary budget surplus - is too difficult to meet and will make Greek debt unsustainable, while EU creditors say that Greek economic performances make it realistic.

The IMF also insists on debt relief measures and said it could continue to participate in the bailout only if Greek debt is sustainable. Germany opposes debt relief but rules out any agreement without the IMF.

"A majority of eurozone members would agree on the IMF bringing just expertise, but Germany and Netherlands insist on having [the IMF]" as a full acting member of the creditors group, an EU source noted on Monday, suggesting that the fund will prevail in its demands.

With another Eurogroup meeting finished with no agreement, concerns are growing over the possibility of a new showdown between Athens and its creditors, like in 2015, with consequences for the Greek and EU economy.

"It is important to avoid delays that would be negative for the [Greek] economic recovery," EU finance commissioner Pierre Moscovici said after the ministers meeting.

In a recent article, Greek journalist Nick Malkoutzis noted that "tell-tale signs of the ongoing erosion of confidence" could be seen in recent data, such as the smaller budget surplus and revenues than expected or the rise in unpaid taxes.

'Not a reassuring sign'

Greek banks have also started to use more money from the ECB's Emergency Liquidity Assistance mechanism, after losing about €4 billion in deposits in recent months.

"It is not a reassuring sign," the EU source told EUobserver.

Various players in the talks suggest that Greece will be obliged to accept the IMF demands when its liquidity reserves are in danger of running out due to debt repayments.

"The next big debt service payment is due only in July, but it would be much better to conclude before that," ESM chief Klaus Regling said on Monday.

EU sources have said that they were confident that an agreement will be found in May, because it would be the last chance before which the disbursement procedure could take place, in time for the July debt instalment.

"In normal situation, Greece would not be able to meet its debt commitment without a new disbursement," a second EU source said.

A source close to the Greek government refused to comment and said it would "not engage in such negative thinking".

To the last minute

"With the uncertainty around the talks, the whole economic situation is deteriorating, but there is no panic, no sense of urgency because we are used to it," Thanasis Koukakis, a financial journalist and analyst in Athens, told EUobserver.

"There is no liquidity problem now," he said, adding that thanks to last year's economic results, the Greek government "has the capabilities to go to October" before facing a liquidity crisis.

Greek prime minister Alexis Tsipras has to deal with opposition within his Syriza party and his government coalition with a nationalist party. And opinion polls now credit him with a 14-percent popularity rate, Koukakis said.

"It is very difficult for Tsipras to do reforms that are usually done by liberals," he argued. "It would be bad for him to take politically toxic measures."

As result, the Greek analyst said "everybody is waiting until the last minute to make a compromise."

Greece and creditors break bailout deadlock

Athens agreed on budget cuts worth up to €3.6 billion and extracted some concessions from creditors, but the IMF warned the package might not be enough.

Creditors put more pressure on Greece

Eurozone finance ministers demand the Greek government adopt new austerity measures for the future or risk the end of the bailout programme.

Eurogroup makes 'progress' on Greek deal

Eurozone ministers endorsed an agreement in principle between the Greek government and its creditors over a new package of reforms. But talks on fiscal targets and debt could still block a final agreement.

Opinion

New model needed to save EU

The challenges and threats to the European Union are all reflected in the Greek case.

Investigation

EU bank accused of muzzling watchdog

An ongoing review of the the European Investment Bank's "complaints mechanism" could make the oversight branch less independent and less effective.

News in Brief

  1. Merkel wins fourth term, exit polls say
  2. EU to hail 'aspirations' of former Soviet states
  3. UK says credit downgrade was wrong
  4. Dutch state appeals ban on taking air-polluting measures
  5. May proposes 2-year transition period after Brexit
  6. May to call on EU's 'sense of responsibility'
  7. Catalonia has 'contingency plans' for independence vote
  8. Last German polls confirm Merkel's lead

Stakeholders' Highlights

  1. EU2017EEEU Finance Ministers Agreed to Develop New Digital Taxation Rules
  2. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  3. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  4. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  5. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  6. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought
  7. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  8. Mission of China to the EUChina Leads the Global Clean Energy Transition
  9. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  10. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  11. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels
  12. Idealist QuarterlyIdealist Quarterly Event: Building Fearless Democracies With Gerald Hensel

Stakeholders' Highlights

  1. Mission of China to the EUPresident Xi Urges Bigger Global Role for Emerging Economies
  2. EU2017EEAre We Socially Insured in the Future of Work?
  3. European Jewish CongressFrench Authorities to Root Out "Societal Antisemitism" After Jewish Family Assaulted
  4. European Federation of Local Energy CompaniesClean Energy for All? On 10.10 Top-Level Speakers Present the Clean Energy Package
  5. UNICEFUp to Three Quarters of Children Face Abuse & Exploitation on Mediterranean Migration Routes
  6. Swedish EnterprisesEurope Under Challenge; Recipe for a Competitive EU
  7. European Public Health AllianceCall to International Action to Break Deadlock on Chronic Diseases Crisis
  8. CES - Silicones EuropePropelling the construction revolution with silicones
  9. EU2017EEEU 2018 Budget: A Case of Three Paradoxes
  10. ACCAUS 'Dash for Gas' Could Disrupt Global Gas Markets
  11. Swedish Enterprises“No Time to Lose” Film & Debate on How Business & Politics Can Fight Climate Change
  12. European Free AllianceSave The Date!! 26.09 - Coppieters Awards To... Carme Forcadell