17th Aug 2022

Greece under fire as creditors lose patience

While Ireland and Spain received fulsome praise as they announced plans to exit their bailout programmes, Greece was cast as the villain of the piece at a meeting of euro finance ministers on Thursday (14 November).

Greece has implemented swingeing cuts to public spending in successive years since receiving the first part of a €240 billion loan package in 2010.

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  • Greece's creditors may refuse to unblock the next €1 billion of funds (Photo: asterix611)

It is expected to return to economic growth in 2014 after six straight years of recession, which has wiped out more than 25 percent of economic output.

But momentum has stalled in the latest review of Greece's programme by Troika officials representing the country's creditors - the European Commission, International Monetary Fund, and the European Central Bank.

The current inspection, which focuses on Greece's economic plans for 2014, began in September but now risks over-running into 2014.

EU officials say that the Greek government needs to make good on previously agreed structural reforms and privatization.

Without sufficient progress on these demands, which would allow the completion of the latest review by the Troika, Greece's creditors will not unblock the next €1 billion of funds.

Speaking after the meeting, EU economic affairs commissioner Olli Rehn acknowledged the sacrifices made by Greece but urged the government to "strengthen the recovery for the sake of the Greek people."

"The urgency is not about financing but political commitment," added Eurogroup chairman Jeroen Dijsselbloem, adding he was "worried" by the lack of progress.

"I think it is very important that the review is finalised as quickly as possible. As we stand now it's going to be difficult to finalise it in time for us to take decisions in December," he told reporters.

Although the Greek government believes that it needs to find spending cuts worth a further €500 million in 2014, the Troika considers the current shortfall to be around €2.9 billion.

Speaking earlier this week, an EU official with knowledge of the Greek programme, admitted that patience with Athens was again running thin.

"We've been dealing with this with Greece for years," he said.

"Eventually this is bad for growth and investment and plays havoc with private enterprise and cash management. Large delays lead to large problems," the official added.

The stark warning for Athens was also underscored by the announcements earlier that both Ireland and Spain would make clean breaks from their rescue programmes in December and January respectively, and would not request temporary credit lines as they returned to self-financing.

"Spain took the right decisions in difficult times," Spanish Finance Minister Luis De Guindos said following the talks. Madrid agreed a €100 billion rescue package for its banks with eurozone partners in July 2012, but has only utilised around €41 billion in loans.

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