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24th Mar 2019

Greece to get four extra months under current bailout

  • Three Eurogroups later, Varoufakis caved in (Photo: Council of European Union)

Greece has agreed to all the conditions laid out by Germany and is likely to get its bailout programme extended by another four months, provided international creditors give a green light on Monday.

A meeting of eurozone finance ministers (the Eurogroup) on Friday (20 February) ended after "intense", "difficult" and "laborious" talks, especially in a smaller format - between Germany, Greece and international institutions.

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In those preliminary discussions, several sources told this website, Greek finance minister Yanis Varoufakis was sidelined, as prime minister Alexis Tsipras spoke on the phone to conclude the deal personally.

Under the accord, Greece has to come up with a precise list of reforms for the next four months, which will be evaluated by experts from the European Commission, the European Central Bank (ECB) and the International Monetary Fund, Eurogroup chief Jeroen Dijsselbloem said after the meeting.

The result of this first review will be communicated also by phone and if it is positive, national parliaments will approve the 4-month extension of the €240 billion bailout which otherwise would have terminated on 28 February.

During these four months, Greece is due to start talks with international creditors on a third bailout, with "clarity expected" on the issue before the extension runs out.

In order to achieve the deal, Tsipras yielded to all German demands - including that a €10.8 billion tranche be repatriated to the EU bailout fund in Luxembourg and only used if banks in Greece request it for recapitalising of their balance sheets.

The money's availability will however be extended for another four months, along with the overall bailout programme.

Greece also pledged not to undertake any unilateral measures or reforms that would compromise the budgetary calculations Athens needs to stick to in order to get the bailout money.

But in a press conference after the meeting, Varoufakis said the plan to raise the minimum wage - announced by his prime minister - is not off the table "after June", giving Ireland as an example of a country which managed to negotiate this with its creditors.

Varoufakis also responded to criticism from the Baltic states and Slovakia, where the minimum wage is currently lower than in Greece, saying that prices are higher in his country and that they were kept high by market-dominant oligopolies, despite revenues going down.

He said the fact that the €10.8 billion remains available for Greek banks - which have seen massive capital flight in the past few weeks - should "put an end to the fear and the scaremongering".

EUobserver understands that at one point, ECB chief Mario Draghi told Tsipras that capital controls will be imposed in the absence of a deal.

According to ECB sources, this danger has now been averted.

"After the decision of the Eurogroup, there is no need for capital controls. Capital controls are out of question," an ECB source said.

The only mild concession Greece has obtained so far is for its budget surplus target for 2015 to be possibly lowered by taking into consideration that the economic situation this year was worse than expected.

But EU economics commissioner Pierre Moscovici said this assessment will be made "in line with EU rules", at the end of the year, rather than be considered on Monday when Greece has to submit the reforms list.

German finance minister Wolfgang Schaeuble said in 2015 "there may be a little less surplus", but overall, Greece has to stick to the "debt sustainability assessment" which foresees how much budgetary surplus Greece has to adhere.

Schaeuble said the agreement was a "positive step" after three "difficult Eurogroup meetings."

"What is crucial is that Greece is sticking to completing the conditions under current programme and that money will be disbursed only after the successful review of the measures," he said.

Greece caves in, Germany plays hardball

The Greek government on Thursday submitted a request to extend the current bailout programme by six months, but Germany rejected the demand on the eve of a meeting of eurozone finance ministers.

Analysis

Brinkmanship on hold, for now

It feels like we’ve been here before. Crisis summits at the end of which both sides declare victory followed, just days later, by another crisis summit.

Eurozone chief backs Greek reforms, but says more needed

Eurozone chief Jeroen Dijsselbloem has backed the reforms plan submitted by the Greek government, but warned that measures such as a functioning tax collection system take time and the budget must not go "off-track" in the meantime.

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