Monday

16th May 2022

Greece wins eurozone concessions, Ireland rebuffed

  • Greece is expected to sell off €50 billion in state holdings, notably real estate (Photo: Aster-oid)

Greece has won a reduction of 100 basis points - one percent - in the interest rate it pays on its €110 billion loan and an extension of the payment period from the current three and a half years to seven and a half.

Ireland was offered a similar reduction, but the country's new prime minister said he could not accept the terms demanded.

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"It was impossible to reach a deal for Ireland this evening," Taoiseach Enda Kenny told reporters after an acrimonious seven-hour meeting of eurozone premiers and presidents in Brussels on Friday.

"I wasn't prepared to contemplate a [common eurozone tax base]," he continued, adding that Ireland still intends to be "constructive" about discussions about EU tax policy as contained in a ‘euro pact' agreed by leaders early Saturday morning, but that was as far as Dublin was willing to go.

He said that Ireland had been asked "to make a reference to our corporate tax rate."

Referring to an angry confrontation between Kenny and French President Nicolas Sarkozy over corporate taxes, he said: "France has had very strong views on corporate tax rates for quite some time, but then so do I."

He said that Ireland unlike Greece had not asked for a loan extension. He insisted: "This country wants to pay its way. We seek no evasion of our responsibilities."

"It will be difficult" to continue the discussions, he added, "but I am convinced we can find a way."

Sarkozy for his part noted that the issue is "very sensitive for our Irish friends."

"There is a discussion that is progressing in one way or another ... but there is no certainty," he continued, asking for "at least a gesture."

In return for Greece's concessions, Athens has committed to a detailed fire-sale privatisation programme worth some €50 billion.

The country had been pushing for a reduction of two percent on the interest it pays, but the request fell on deaf ears in Berlin, Paris, the Hague and Helsinki.

A similar 100-basis-point reduction on the rates Ireland pays on its €85 billion loan was also dangled in front of Prime Minister Enda Kenny, but the quid pro quo demanded by core eurozone countries was that Dublin agree to a common tax base for the single-currency area, a move that the taoiseach has described as "tax harmonisation through the back door."

Ireland refused the deal, but both Kenny and French President Nicolas Sarkozy said that discussions on the matter will continue.

On 11 February, experts from the troika of the International Monetary Fund, the European Commission and the European Central Bank took the Athens leadership by surprise when they announced that Greece was to embark on an ambitious privatisation programme worth €50 billion by 2015.

The announcement came as something of a shock because at the start of the bail-out programme, the troika had demanded state sell-offs amounting to €1 billion a year from 2011 to 2015, for a total of €5 billion. As recently as the first review of the Greek austerity programme by the troika, little more was demanded from the government.

A second review, in December last year, announced that Greek authorities were preparing a "more ambitious three-year" privatisation strategy than originally agreed, amounting to at least €7 billion over the next three years, following a review of real estate holdings.

The shock €50 billion announcement provoked outrage in Athens.

Prime Minister George Papandreou called up IMF boss Dominique Strauss-Kahn and commission economy chief Olli Rehn to complain about what Greek government spokesman George Petalotis had called "unacceptable behaviour."

"We did not ask anybody to meddle in the internal matters of the country," he said at the time.

Athens appears to have eaten some very expensive humble pie however.

Papandreou told reporters that he had made "no new commitments" in terms of privatisation plans and that the €50 billion schedule was already in play.

According to an EU diplomat from another core eurozone state, Greece offered up a list of what is to be sold off "and it was satisfactory."

The emphasis will be on selling off public real estate. According to the conclusions of the eurozone summit, Greece is to "fully and speedily complete the €50 privatisation and real estate development programme." IMF analysts note that the country has between €200 and €300 billion in land holdings.

The leaders also backed a ‘euro pact' aimed at boosting the EU's competitiveness through wage restraint, cutting public spending, making it easier to fire employees and raising retirement ages, amongst other measures.

Non-euro EU states, such as Sweden, Denmark, the UK, and Poland, will be invited to join the pact at the European Council of 24-25 March.

They agreed that a permanent eurozone rescue fund is to have an overall effective lending capacity of €500 billion and that the funds may "as an exception" intervene in the primary debt market - meaning purchase of government bonds upon issue - but only alongside the imposition of "strict conditionality".

While much of the emphasis was on austerity and cuts to the public sector, leaders did back one measure that imposes costs on banks. They said that a financial transaction tax "should be explored and developed further" at the euro area, EU and international levels.

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