Monday

4th Jul 2022

Greece gets two more months to exit bailout

Eurozone finance ministers on Monday (8 December) extended Greece's bailout programme by two months, while the Greek government is fighting for political survival and has brought forward presidential elections.

The decision comes after the troika of international lenders - the European Commission, European Central Bank and International Monetary Fund (IMF) - was in earlier talks in Athens unable to pin down what should be the last reforms needed to disburse the final tranche of money.

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  • Greece has always had troubles sticking to deadlines (Photo: Constantine Gerontis)

Greece is still due €1.8 billion out of a total of €240 billion under two consecutive bailouts since 2010.

Eurogroup chief Jeroen Dijsselbloem said in Monday's press conference in Brussels that a "short extension" was preferable to a "long-term extension" and expressed confidence that the government in Athens will be able to agree with the troika on the outstanding measures.

He explained that "one month would have been too short, but two months is doable, and the Greek minister confirmed it."

The Greek government is expected to table the formal request for the bailout extension on Tuesday.

The troika has also tasked it to give a detailed account to ministers of what kind of measures have been agreed so far "so that the progress made is not lost," Dijsselbloem said.

Shortly after the announcement, the Greek government brought forward a planned presidential vote to 17 December, amid concerns that if the ruling coalition fails to impose its candidate, the left-wing, anti-troika Syriza party may come to power.

According to Greek law, the parliament must be dissolved and new elections called if it cannot elect a president, which requires approval by 180 lawmakers in the 300-seat chamber.

The ruling coalition has 155 MPs, but is counting on the support of independent MPs to reach the 180 votes.

Bringing the vote forward suggests even less inclination to cough up additional spending cuts required by the troika to cover a €2 billion gap in the 2015 budget - the reason why the troika talks collapsed.

According to EU economic affairs commissioner Pierre Moscovici, one of the outstanding issues is for Greece to reach a budgetary surplus in 2015 of 3 percent of GDP.

This is linked to Greece's crushing debt burden, which can only be reduced if the country spends less than it earns, and with the IMF unable to close off a bailout when debt is considered "unsustainable".

Greek prime minister Antonis Samaras is also in disagreement over how to proceed after the country exits the bailout.

He is adamant that no further EU-IMF loans are needed, even though borrowing costs - as tested in a recent bond auction October - are still too high.

In a statement issued on Monday, the Greek government blamed Syriza for undermining its efforts to exit the bailout without any further loans.

"Unfortunately, the open encouragement of the lawmakers by the main opposition to deter the election of a president and lead the country to snap elections undermines Greece's negotiating position and sends signals of uncertainty to the markets," government spokeswoman Sofia Voultepsi said.

The Eurogroup, for its part, would rather see Greece continue with a "precautionary credit line" once the bailout programme is over.

The decision is likely to be taken in February if the troika reaches an agreement with Athens by then.

The two-month extension will have to be approved by some national parliaments - notably the German and Dutch assemblies.

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