Monday

16th May 2022

EU to Greece: New austerity package or no cash

  • Eurogroup chairman Juncker (r) and French finance minister Lagarde in Luxembourg on Monday (Photo: consilium.europa.eu)

EU finance minsters warned Greece on Tuesday that it must achieve "national unity" on its new austerity package and push through the measures or the latest tranche of bail-out cash would not be handed over.

The economy chiefs said that the sum ,€12 billion, will be disbursed mid-July pending the latest EU-IMF-ECB assessment of the country's compliance with already agreed austerity and structural adjustment and "the passing of key laws on the fiscal strategy and privatisation by the Greek parliament."

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Heading into the meeting, ministers had expected an outline agreement to be achieved, and EU economics commissioner Olli Rehn last week had said he expected consensus on the matter. Instead ministers insisted that Greece deliver the goods before they could endorse a release of the cash.

"Ministers call on all political parties in Greece to support the programme's main objectives and key policy measures to ensure a rigorous and expeditious implementation," they said.

"Given the length, magnitude and nature of required reforms in Greece, national unity is prerequisite for success."

According to an EU source, it was the IMF that held those in the room back. The international institution needs "insurance" that Greece can finance itself for the next 12 months.

Neither the IMF nor other eurozone ministers were happy with what Greece had so far delivered. The first privatisation measures were supposed to have kicked off in the first quarter of the year, "but we're still waiting on this," he said.

"But the timing is all right. There is the vote of confidence in parliament tomorrow, so this is still in keeping with schedules that are out there."

Another EU source was more frank: "They've effectively kicked it not into the long grass, but perhaps the medium-term grass. It's a bit messy. They've pushed the deadline as late as it goes."

"It's classic crisis mis-management."

The new Greek finance minister in his first international outing since being appointed last week in a cabinet reshuffle reportedly "just sat on his own while others did the talking."

"He didn't do that great a job," said another EU source.

No agreement was reached on the form a second bail-out of the country, expected to be in the region of €120 billion.

However, in something of a victory for Germany and the Netherlands, who have insisted on the significant participation of private bondholders in any second bail-out of the country in order to minimise the level of public cash on the line, language in the ministerial statement stressed the involvement of "both official and private sources."

At the same time, the statement underlining the "pursuit of voluntary private sector involvement", meaning that this could not be imposed on creditors, can be read as support for worries from the ECB and France in particular that any hint of coercion will result in rating agencies assessing attempts at soft restructuring of Greek debt as a default instead.

Ministers did say that they hoped to define the "main parameters" of a second bail-out by early July.

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