Friday

31st Mar 2023

Euro ministers to approve 2nd Greek bail-out

  • Greek finance minister Evangelos Venizelos (l) will head the Socialist Party in the upcoming general elections (Photo: consilium.europa.eu)

Eurozone finance ministers are meeting in Brussels on Monday (12 March) to give their final approval to the second Greek bail-out. But Spain's deficit problem is likely to weigh heavily on the talks.

In a conference last Friday, the so-called Eurogroup ministers approved the release of around half of the €130 billion bail-out, which is to help fund a massive bond-swap between Greece and private debt-holders.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The private sector involvement was deemed successful as over 85 percent of private and state-owned banks, investment funds and pension funds agreed to change their old Greek bonds for new ones at a net loss of over 70 percent.

By triggering "collective action clauses" on reluctant bondholders, Athens forced an even higher participation rate of over 95 percent. The move was deemed a "credit event" by finance associations, meaning that default insurances to the tune of €2.4 billion have now to be paid out and ratings agencies have placed Greece in "restricted default" territory - just one notch higher than outright bankruptcy.

Indicating that the forced losses were part of the plan, Eurogroup chief Jean-Claude Juncker said the "necessary conditions are in place" for the final approval on the bail-out, however. He also said the Washington-based International Monetary Fund (IMF) would contribute "substantially" to the new rescue package.

The IMF is expected to put some €28 billion on the table, its chief Christine Lagarde indicated on Friday, with a final approval by the lender's board due on Wednesday. Some €10 billion of it is not fresh money, however, but is to be rolled over from Greece's first bail-out, agreed in 2010 and as yet not paid out in full.

With general elections later this month and with voters angered by the harsh austerity measures linked to the bail-outs, Greece's troubles are unlikely to be over.

EU economics commissioner Olli Rehn last week called the second bail-out "a unique opportunity not to be missed" and said he now expects Greek authorities "to maintain their strong commitment to the economic adjustment programme and to rigorously and timely implement the policy package."

Similar warnings came from IMF chief Lagarde. "Restoring competitiveness and a sustainable fiscal position will require Greece to undertake sustained and deep structural reforms over a prolonged period," she said.

In a report presented to the Eurogroup last week, her staff warned that failure to stick to the agreed targets would put up financing costs for Athens by another €15 billion. Meanwhile, the possibility for a third Greek bail-out has not been ruled out by either German finance minister Wolfgang Schauble or by Eurogroup chief Juncker.

The latest data released on Friday showed the Greek economy shrank by a worse-than-expected 7.5 percent in the fourth quarter of 2011. Overall, the Greek economy contracted by 6.9 percent last year, instead of the 5.5 percent projections eurozone financiers had counted on.

Lagarde, a former French finance minister, also urged her ex-colleagues to boost the eurozone's bail-out funds - a move so far resisted by Germany. The most likely scenario for the Eurogroup to approve - but not on Monday - is for the €250 billion left over from the temporary European Financial Stability Facility to be added rather than subtracted from the €500-billion-strong permanent European Stability Facility due to come into force in July.

Spanish troubles

Ministers on Monday are also expected to look at Spain's worsening economic figures - the first major test for the EU's strengthened deficit rules.

Just minutes after signing a German-inspired treaty on fiscal discipline, Prime Minister Mariano Rajoy earlier this month announced that his country would not be able to cut its public deficit to 4.4 percent of gross domestic product as agreed with the EU commission, but would aim for 5.8 percent instead.

High unemployment rates and recession make it difficult for the newly elected Prime Minister to stick to targets drawn up last year, when the economy was still expected to grow. The EU commission has sent experts to Madrid to look at the latest macro-economic data and compare it with the deficit targets, before ruling if Spain needs to pay fines or if it can agree to extra leeway.

The Netherlands has also announced it will overshoot its deficit targets but has indicated that, unlike Madrid, it will not seek flexibility.

Greece clinches do-or-die bond-swap deal

Greece has secured over 80% participation in a debt restructuring designed to avoid a messy default. But forced losses imposed on some investors are still an issue.

IMF: No money for Greece until Europe boosts its firewall

One of the many loose ends to the Greek bail-out agreed Tuesday is the lack of a firm commitment from the International Monetary Fund, pending a decision by eurozone leaders next week to merge the firepower of two bail-out funds.

Police violence in rural French water demos sparks protests

Protests are planned in 90 villages across France on Thursday to protest against escalating police violence that have left 200 people injured, including two people who are still in a coma, after a violent clash in Sainte-Soline over 'water privatisation'.

EU approves 2035 phaseout of polluting cars and vans

The agreement will ban the sale of carbon-emitting cars after 2035. The EU Commission will present a proposal for e-fuels after pressure from German negotiators via a delegated act, which can still be rejected by the EU Parliament.

Opinion

Dear EU, the science is clear: burning wood for energy is bad

The EU and the bioenergy industry claim trees cut for energy will regrow, eventually removing extra CO2 from the atmosphere. But regrowth is not certain, and takes time, decades or longer. In the meantime, burning wood makes climate change worse.

Opinion

EU's new critical raw materials act could be a recipe for conflict

Solar panels, wind-turbines, electric vehicle batteries and other green technologies require minerals including aluminium, cobalt and lithium — which are mined in some of the most conflict-riven nations on earth, such as the Democratic Republic of Congo, Guinea, and Kazakhstan.

Latest News

  1. EU sending anti-coup mission to Moldova in May
  2. Firms will have to reveal and close gender pay-gap
  3. Why do 83% of Albanians want to leave Albania?
  4. Police violence in rural French water demos sparks protests
  5. Work insecurity: the high cost of ultra-fast grocery deliveries
  6. The overlooked 'crimes against children' ICC arrest warrant
  7. EU approves 2035 phaseout of polluting cars and vans
  8. New measures to shield the EU against money laundering

Stakeholders' Highlights

  1. InformaConnecting Expert Industry-Leaders, Top Suppliers, and Inquiring Buyers all in one space - visit Battery Show Europe.
  2. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  3. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  4. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  5. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence
  6. Nordic Council of MinistersCSW67: The Nordics are ready to push for gender equality

Stakeholders' Highlights

  1. Azerbaijan Embassy9th Southern Gas Corridor Advisory Council Ministerial Meeting and 1st Green Energy Advisory Council Ministerial Meeting
  2. EFBWWEU Social Dialogue review – publication of the European Commission package and joint statement of ETUFs
  3. Oxfam InternationalPan Africa Program Progress Report 2022 - Post Covid and Beyond
  4. WWFWWF Living Planet Report
  5. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains

Join EUobserver

Support quality EU news

Join us