21st Sep 2019

Agreement over next slice of Greek aid

  • The Greek Parliament. MPs must also agree the terms of Friday's deal (Photo: EUobserver)

International creditors have pledged to provide Greece with the second tranche of its €110 billion bailout, agreed last year, opening the door to a second potential support package as the country's debt pile continues to mount.

At a meeting in Athens on Friday (3 May), officials from the International Monetary Fund, the European Commission and the European Central Bank - known collectively as the troika - agreed in principle to hand over the second €12 billion slice of aid in July.

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The 11th-hour deal to shore-up Greece's short-term needs comes amid protracted debate over the speed of the country's €50 billion privatisation plan, with a smaller-than-expected collection of tax receipts this year also causing alarm among creditors.

As part of Friday's agreement, Greek Prime Minister George Papandreou promised additional austerity measures and the establishment of a specialised agency to manage accelerated asset sales.

A further loss of Greek sovereignty could also see the EU provide Athens with assistance in tax collection. "We remain open to explore possibilities for further and reinforced assistance should there be a need, for instance in taxation and privatisation matters," EU economy commissioner Olli Rehn said in a statement.

The prospect of external involvement in Greece's tax system reflects anxiety over rampant tax evasion, hampering Athens' efforts to haul its public finances back into line.

The decision to release the second tranche of aid next month must still be approved by political leaders in Europe, but discussions are already underway for a second Greek bail-out, widely expected to be in the region of €60 billion.

EU finance ministers will thrash out the details of a new bailout in the coming weeks, with Luxembourgish Prime Minister Jean-Claude Juncker, head of the euro group of states, last week insisting that the final deal would "include private sector agreements on a voluntary basis".

Many economists have repeatedly warned that some form of debt restructuring, rather than ever-increasing financial aid, would be necessary to bring Greece's problems to an end.

At the same time, tensions are mounting within Papandreou's centre-left Pasok party, amid ongoing anti-austerity strikes and protests across Greece.

Modeled on Spanish protests, large crowds have gathered in Athens' central Syntagma Square each night since 25 May, with protesters holding 'popular assemblies' every evening.

An estimated 50,000 people gathered on Saturday night, shouting "thieves, thieves" at the parliament building and banging pots and pans. Greek MPs must also approve the conditions of the latest €12 billion aid slice.

As the eurozone's debt crisis continues to rumble on, European Central Bank chief Jean-Claude Trichet set out his vision of for the "union of tomorrow", including a common European finance ministry.

Accepting the Charlemagne Prize for European unity last week, Trichet said future rules for the euro currency club could include veto power for European institutions over national budgets, with a common finance ministry to shape countries' economic policies.

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