Monday

4th Jul 2022

Greece returns to haunt euro ministers

  • Bailouts will top the agenda of a quiet Eurogroup meeting in Brussels (Photo: u07ch)

Eurozone finance ministers will meet on Thursday (14 November) with the currency union's four bailout programmes dominating an otherwise quiet agenda.

Officials are, once again, becoming frustrated by Greece. The Greek government and its creditors are "billions apart" on the country's 2014 budget, an EU official with knowledge of the programmes told reporters earlier this week.

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The Greek government believes that it needs to find spending cuts worth a further €500 million, while the Troika - composed of officials from the European Commission, the International Monetary Fund and the European Central Bank - estimates the current shortfall to be €2.9 billion.

Troika officials will return to Greece on Friday, a day after briefing finance ministers in Brussels.

"The signals are not good," the official said, adding: "I am starting to get more concerned about how we can get this review under our belt."

The wrangling means that the next €1 billion tranche of the rescue package is highly unlikely to be disbursed before the end of 2013, as officials wait for Athens to back down.

Although Greece does not face an immediate cash-flow crisis, it is expected to require an additional €10 billion in bailout loans to cover its bills over the course of 2014.

More positive has been the progress of Ireland and Spain who will conclude their respective bailout programmes in December and have been given a clean bill of health by their creditors.

The Troika has now completed its final review of Ireland's three-year, €78 billion bailout programme, which comes to an end on 15 December.

With interest rates on 10-year Irish government bonds now standing at 3.7 percent, down from a peak of 15 percent in 2010, and well below the 7 percent threshold at which a country can continue to self-finance, officials believe that Ireland can take care of its own needs on the money markets without further help.

Meanwhile, Spain has indicated that it does not intend to draw any more than the €41 billion already provided by the European Stability Mechanism to bolster its banking sector.

For his part, economic affairs commissioner, Olli Rehn, said Monday (11 November) it was "very probable" that Spain and Ireland would not need further help.

However, they are also keeping the door open to the prospect of establishing a bridging credit line.

"It is up to Spanish and Irish governments," the EU official added.

The Irish government is currently consulting with its national parliament on whether to request a credit line and is expected to take a decision within weeks, while Spain's prime minister Mariano Rajoy has already ruled out a similar facility.

Elsewhere, finance ministers from the EU-28 will on Friday revisit talks on the proposed single resolution mechanism for banks - the latest segment of banking union legislation.

Lithuanian officials are hoping to agree a common position among governments before they hand over the EU's rotating presidency at the end of the year.

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