Tuesday

4th Oct 2022

Eurozone clears path for Greek bailout extension

  • Eurozone finance ministers have approved the Greek reforms, but IMF chief Lagarde (l) is sceptical (Photo: Council of European Union)

Eurozone finance ministers on Tuesday (24 February) approved a list of reforms submitted by Athens and cleared the path for national parliaments to endorse a four-month extension of the Greek bailout, which otherwise would have run out on 28 February.

"We call on the Greek authorities to further develop and broaden the list of reform measures, based on the current arrangement, in close coordination with the institutions," the Eurogroup of finance ministers said in a press statement.

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National parliaments, notably Germany's Bundestag, will still have to approve the move this week.

The three international creditors - the European Central Bank, the European Commission and the International Monetary Fund - earlier that day gave an assessment of the reforms plan and said they were "sufficiently comprehensive to be a valid starting point" for the bailout loans to be extended and paid out.

But the IMF, while saying it can support the conclusion that the reforms plan is "sufficiently comprehensive", criticised the plan for lacking details particularly in key areas.

"We note in particular that there are neither clear commitments to design and implement the envisaged comprehensive pension and VAT policy reforms, nor unequivocal undertakings to continue already-agreed policies for opening up closed sectors, for administrative reforms, for privatisation, and for labour market reforms," IMF chief Christine Lagarde wrote in a letter to Eurogroup chief Jeroen Dijsselbloem.

On the other hand, Lagarde noted that the list being "not very specific" is "perhaps to be expected" given that the government of Alexis Tsipras is new in office.

She also praised the new Greek government's commitment to combatting tax evasion and corruption, adding that the IMF looks forward "to learn more about their plans".

Unlike the EU part of the Greek bailout, the IMF loans did have to be extended, as they only run out mid-2016.

But they still depend on a "successful review" of the reforms programme, as each bailout tranche has since 2010 when Greece first contracted international loans to avoid bankruptcy.

The Greek government is expected to flesh out its reform plans and finish negotiations with the "institutions" before the end of April, which will allow for the outstanding bailout tranche of €7.2bn to be paid out. Talks about a third bailout are also expected to be carried out during the four-month bailout extension, which will run out at the end of June.

The best-case scenario would be for Greece to be able to access markets on its own and only require a "precautionary loan", but Dijsselbloem expressed scepticism that this would happen.

Pressure will be high for the Tsipras government to agree on a third bailout before July, when his country needs to repay €3.5 billion to the ECB and its eurozone partners.

Eurozone chief backs Greek reforms, but says more needed

Eurozone chief Jeroen Dijsselbloem has backed the reforms plan submitted by the Greek government, but warned that measures such as a functioning tax collection system take time and the budget must not go "off-track" in the meantime.

Greece to get four extra months under current bailout

Greece has agreed to all the conditions laid out by Germany and is likely to get its bailout programme extended by another four months, provided international creditors give a green light on Monday.

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