27th Nov 2022

Euro summit delays decision on Greek bailout

  • Greek PM Alexis Tsipras (r) and French president Francois Hollande (l) at the euro summit in Brussels. Further work is needed before an agreement is reached. (Photo: Consillium)

Eurozone leaders acknowledged on Monday night (22 June) that the latest Greek reform proposals are "a positive step”, but delayed a bailout agreement until a Eurogroup meeting on Wednesday (24 June) or the EU summit on Thursday (25 June).

"What Greece proposed is some progress, but intensive work is necessary and very little time is left," German chancellor Angela Merkel said at a press conference after the euro summit in Brussels.

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The 12-page document sent by the Greek government on Sunday night contains proposals to address the fiscal targets set by its creditors, with a primary surplus at 1% of GDP this year, 2% in 2016, 3% in 2017, and 3.5% in 2018.

The proposals also include measures to reduce the pension system and raise VAT.

"We've gone 90% of the way," a EU official said.

"If we agree on a 23% VAT rate for restaurant and catering, we are there," the source added, joking that the bill would be paid by German and French tourists.

Eurozone leaders did not discuss the issue of debt relief, one of the Greeks' main demands.

"This is not time to discuss that issue," Jean-Claude Juncker, the European Commission president told reporters after the meeting.

Officials said the current bailout programme should be concluded before debt relief is addressed.

One source said Germany isn’t keen to talk about debt relief, or how Greece can finance itself in the long term, until the programme review is concluded.

"They want the programme review first," the source added, suggesting that Greek PM Alexis Tsipras will have to meet the latest creditors' demands on VAT before getting a commitment on debt and financing.

The principle of extending the current programme is now accepted by all sides, but its length was not discussed.

While the Greek government has been asking for a nine-month extension, some eurozone countries are said to accept only a two or four-month extension.

In any case, French president Francois Hollande told reporters, "all countries ruled out a third bailout programme".

Several options are on the table to provide Greece with money after the end of the current programme on 30 June, including unused structural funds and facilities from the EU €315 billion investment plan.

Juncker mentioned a €35 billion investment programme for 2015 to 2020 that could start in the second semester of this year.

Meanwhile, the Greek government proposed to reform the products and services market to reduce the cost of living for the population and open the Greek economy to more competition.

"Greece is expensive because there are 500 regulatory obstacles," in many products and areas such as pharmacies, milk, olive oil, the distance between hotels or the Sunday opening of shops, the EU official said.

The detail of the proposals will now be assessed by experts from the three creditors institutions, the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF).

They will assess "the cost of the measures proposed, their impact on economic growth in Greece and which structural reforms can be added to tax and budgetary measures," Francois Hollande said.

EU council president Donald Tusk said he hoped "that the Eurogroup can achieve results on Wednesday evening that can be presented Thursday morning" before the EU summit on Thursday evening.

ECB says more rate hikes to come

European Central Bank president Christine Lagarde said more rate hikes will come, but also admitted a recession will not lower inflation — leaving some economist question the logic of the policy.

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