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1st Jul 2022

EU and IMF reportedly eyeing €120bn for Greece

  • The EU and IMF have so far committed to contributing €40-45 billion to Greece this year (Photo: 1suisse)

The parliamentary leader of Germany's Green party, Juergen Trittin, has indicated that the EU and the IMF are currently eyeballing a figure in the range of €100-120 billion in aid for Greece, as part of a three-year lending package.

Mr Trittin made the remarks following a meeting on Wednesday (28 April) between German parliamentary groups and IMF chief Dominique Strauss-Kahn and ECB president Jean-Claude Trichet.

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"The package will run over three years," media quoted Mr Trittin as saying. "Greece should be removed de facto from financial markets for three years."

The meeting was hastily arranged earlier this week as key players such as Mr Strauss-Kahn attempt to convince the country's lawmakers to approve a Greek loan bill, which German finance minister Wolfgang Schaeuble hopes to discuss with the German cabinet next Monday.

With Greece due to pay back roughly €8.5 billion to bondholders on 19 May, EU, IMF and Greek officials are currently racing to put a detailed loan package in place, with talks ongoing in Athens.

A day after fresh credit rating downgrades for Greece and Portugal unleashed a new wave of market turbulence, EU officials insisted the current programme to bail-out Athens was on track, dismissing suggestions that the country's debt may need to be restructured.

The talks in Athens outlining the lending terms will be will be finalised "in the coming days", said European Commission economy spokesman Amadeu Altafaj on Wednesday. "There is no doubt that Greece's needs will be met in time."

Mr Altafaj also said the commission remained confident in Portugal's budget consolidation programme, adding that Lisbon was ready to "envisage additional measures of fiscal consolidation" for as soon as this year, if needed.

Portuguese stocks continued to fall on Wednesday, a day after a downgrade by credit rating agency Standard & Poor's increased fears of contagion spreading from Greece's debt crisis.

The commission called on all players involved, including rating agencies, to act responsibly, but refrained from issuing a direct rebuke to the agency. "We would expect that when Credit Rating Agencies assess the Greek risk, they take due account of the fundamentals of the Greek economy," said financial services spokeswoman Chantal Hughes.

The EU agreed a new regulation on credit rating agencies last year, set to come into force on 7 December 2010, with a future European financial markets agency expected to have an important role in monitoring the powerful bodies.

German timetable

With roughly €8.4 billion in bilateral aid for Greece expected to come from Germany this year, Europe's largest economy is seen as crucial to successfully agreeing a Greek bail-out package in time.

On Wednesday European Council President Herman Van Rompuy indicated he plans to hold a meeting of euro area leaders around the 10 May, in order to finally sign off on a Greek support package.

Member states are currently preparing the ground for a release of funds to Greece ahead of the euro area meeting, with German Chancellor Angela Merkel holding an emergency cabinet meeting on Wednesday.

Despite opposition demands, Ms Merkel insisted that the country's banks should not contribute to loans to Greece, winning the support of ECB chief Jean-Claude Trichet.

Assuming Greek lending-term talks in Athens can be wrapped up this weekend, German finance minister Wolfgang Schauble hopes to discuss the Greek loan bill with cabinet next Monday, before then passing it to parliament for discussion. The house's upper chamber could potentially debate the bill when it meets on 7 May.

Failure to meet this tight deadline could result in German parliamentary approval being shunted into the second half of the month, past the crucial 19 May Greek debt deadline.

Berlin is also facing a challenge over the legality of any loan to Greece, another potential speed bump preventing a rapid transfer of funds. "As soon as the law on help for Greece is through parliament, we will launch a legal complaint" said economics professor Karl Albrecht Schachtschneider, referring also to three other lawyers.

Questions over Berlin's willingness to rapidly approve funds for Greece have also been raised, with Ms Merkel facing a crucial regional election on 9 May, and polls indicating any Greek bail-out would be unpopular with voters.

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