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06/12/2016

Eurogroup getting impatient with Greece

Euro & Finance

Eurogroup getting impatient with Greece

Jeroen Dijsselbloem, 9 March. [European Council]

Warning Greece it had “no time to lose”, eurozone ministers agreed to technical talks between finance experts from Athens and its international creditors would start on Wednesday (11 March) with the aim of unlocking further funding.

“We’ve talked about this long enough now,” an impatient-sounding Dutch Finance Minister Jeroen Dijsselbloem said after chairing Monday’s meeting of eurozone colleagues, their first since 20 February, when they extended Greece’s bailout deal to June.

“We only have four months,” he said. “Let’s get it done.”

The new left-wing Greek government, keen to show voters it is keeping election promises to break with EU-imposed austerity measures, has tried the patience of its EU peers, by arguing over the form and venue for detailed talks required to establish its needs, and whether it has met conditions the creditors have set on reforms.

In a compromise, Dijsselbloem said the negotiations among financial experts from Greece and the creditor institutions — the European Commission, European Central Bank and International Monetary Fund — would start in Brussels on Wednesday, not in Athens as has been normal for EU bailout programmes so far.

Those talks, however, would be “supported” by international teams working in Athens to obtain and check information.

http://www.euractiv.com/video/eurogroup-warns-greece-stop-wasting-time-312767

‘Troika is finished’

The Greek government has insisted it will no longer deal with the “troika”, as the three institutions have been called in a term that is now anathema for many Greeks who associate it with neoliberal fiscal policies identified with the IMF, and Germany. It has also said it will not tolerate irksome foreign inspection visits to Athens.

The Eurogroup now calls the troika “the institutions” and the talks will, formally at least, be based in Brussels. EU ministers say they do not want “semantics” to get in the way of negotiations intended to prevent Greece going bankrupt and potentially being forced to abandon the single currency.

Greek Finance Minister Yanis Varoufakis, a Marxist academic, and economist, who has enlivened the Eurogroup with barnstorming rhetoric against austerity, insisted the “troika is finished”.

Officials from the institutions in Athens would be given all the information they needed, he said, but the old style that drew comparisons from Greeks of the Nazi occupation was over:

“The idea of troika visits, comprising cabals of technocrats from the three institutions in lockstep walking into our ministries and trying to implement a programme which has failed … that is a thing of the past,” he said.

It had “alienated” Greeks and contributed to a resistance to reform, Varoufakis exlained, declaring that no time had been wasted and that he expected to conclude a successful review ahead of schedule.

How rapidly negotiations will proceed remains to be seen. The Eurogroup agreement last month made disbursement of further funds before the current EU programme expires at the end of June conditional on Greece passing a final set of tests that it is reforming its economy to cope with its massive debts.

Cash crunch

Dijsselbloem acknowledged Greece was under severe pressure to find the cash to pay looming debt service commitments, but said that pressure ought to serve as an incentive to reach a deal with the creditors. However, he added that if Greece showed it was implementing some of the measures, then some funds could be released before the planned review concludes next month.

Varoufakis has submitted a list of reforms the government is ready to take and, criticising the way media reported that the list fell short of what his eurozone colleagues were looking for, said more batches of proposals were to come.

The government has put an emphasis on raising more taxes by clamping down on widespread cheating. But eurozone peers, notably including the bloc’s German paymaster, say that is far from enough. Revenues have in fact dropped since the election in January, as taxpayers hold off, hoping the government cuts rates.

One new proposal, the Greek official said, was to encourage consumers to demand tax-compliant receipts for goods and services by letting them use such receipts to enter a lottery.

Ministers spent barely 30 minutes discussing Greece at what was scheduled as a routine monthly meeting, an EU official said, stressing to Varoufakis that it was time to engage in serious, detailed discussions with experts from the creditors.

Varoufakis, who insisted that no time had been wasted since 20 February, irritated EU partners by dangling the prospect of a referendum in a weekend newspaper interview — though he himself criticised the paper’s reporting and said he had responded to a purely hypothetical question that could not arise.

>> Read: Varoufakis: We can return to elections

Shut out of capital markets, with international loans frozen and tax revenues falling, Greece could run out of cash later this month. However, a Greek official said Athens had enough to pay the second of four €310 million loan installments due on 13 March. Two more are due on 16 and 20 March.

Varoufakis said he was confident the government, helped by its creditors, would remain solvent during the negotiations.

Eurozone governments assume that Greece will need further financial support after the current programme expires, although they and Athens will not discuss that in public at the moment.

An ECB source said the cash position of Greek banks, on a drip-feed of emergency lending, appeared to be stabilising after heavy deposit outflows from December to late February.

The ECB’s Governing Council is set to hold a teleconference on Thursday to discuss extending that emergency liquidity assistance (ELA), a person familiar with the matter said.

Better off out?

A senior ally of German Chancellor Angela Merkel said Greece would be better off outside the eurozone, suggesting that Finance Minister Wolfgang Schäuble privately agreed.

“By leaving the eurozone, as Schäuble has suggested, the country could make itself competitive again from a currency perspective with a new drachma,” Peter Ramsauer of the Bavarian Christian Social Union (CSU) wrote in Germany’s right-wing daily, Bild, well-known for its criticisms of Germany’s bailout program.

Merkel and Schäuble have both said publicly they want to keep Greece in. But in a sign that German views may be shifting, Ramsauer said a temporary “Grexit” would be a “great opportunity” to boost its economy and administration, “making it fit to return to the euro area from a position of strength”.

Seeking European support, Greek Prime Minister Alexis Tsipras will meet European Commission President Jean-Claude Juncker in Brussels on Friday. Juncker has been trying to mediate between the new Athens government and its EU creditors, notably Germany, but his efforts have irritated Berlin.

An opinion poll on Monday showed a large majority of Greeks want Athens to compromise to avoid having to leave the euro. 

Background

Greece secured a four-month extension of its financial rescue on 24 February when its eurozone partners approved a reform plan that backed down on key left-wing measures and promised that spending to alleviate social distress would not derail its budget.

The respite, to be ratified by some national parliaments in the coming days, averted an imminent banking meltdown and a potential state bankruptcy for now. But tough negotiations lie ahead over the country's economic future.

A Greek finance ministry official said the eurozone's most heavily indebted nation would start discussions immediately with its EU and IMF partners on meeting this year's financing shortfall.

As required by the creditors, Finance Minister Yanis Varoufakis had sent Brussels a letter that watered down campaign promises to end privatisation, boost welfare spending and raise the minimum wage, vowing to consult partners before key reforms and to keep them budget-neutral.

The Greek letter pledged not to reverse ongoing or completed privatisations, and to ensure that the fight against what the government calls the humanitarian crisis caused by bailout-driven austerity "has no negative fiscal effects".

>> Read: Greece to pass anti-austerity bill

Timeline

  • 13 March: Jean-Claude Juncker and Alexis Tsipras to meet.

Further Reading