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10/12/2016

Greece will request new financial programme

Euro & Finance

Greece will request new financial programme

Euclid Tsakalotos

[Shutterstock]

Greece did not submit any new reform proposals at Tuesday’s (7 July) meeting of eurozone finance ministers in Brussels, but will request a new financial programme tomorrow, according to Eurogroup President Jeroen Dijsselbloem. 

New Greek Finance Minister Euclid Tsakalotos, carried many documents under his arm as he walked into the Council’s Lex building for the extraordinary meeting, but made no new suggestions to solve the crisis. 

Instead, Greece will request a new programme on Wednesday (8 July), Dijsselbloem said, and ministers will take part in a Eurogroup conference call afterwards. 

A week ago, Greece failed to make €1.6 billion loan payment to the International Monetary Fund (IMF), becoming the first developed country to default on an IMF loan. On 20 July, Greece has to repay the European Central Bank (ECB) another €3.5 billion, or funds for its banks will likely be cut off.

Over the past six months, Greece and its creditors – the IMF, the ECB and the EU – have discussed reforms to Greece’s current bailout programme, at the request of the Greek government.

Smaller countries call for ‘Grexit’

Ahead of the Eurogroup meeting, finance ministers, especially from smaller eurozone countries, expressed their frustration with the Greek government, which won a No vote in Sunday’s referendum on whether to accept bailout terms.

Latvia’s J?nis Reirs told reporters that Greece leaving the eurozone is a solution which the financial markets already have looked into. “It won’t be a problem for Europe or Latvia,” he said.

The minister said many other EU countries have been in a similar situation to Greece, like Latvia in 2008, but these countries overcame the crisis by introducing structural reforms.

“Latvian people don’t understand the Greeks. They are surprised,” Reirs said. 

Maltese finance minister Edward Scicluna pointed out that Greece, as part of the eurozone, could soon be a thing of the past.

He said that while Grexit has been mentioned previously as a threat or a stick to the country, it is now “a realistic possibility”.

No debt relief

Slovakia’s Peter Kažimír said that prolonging the bad situation would be detrimental for the country. He said that debt relief is the most delicate issue for the Eurogroup and that the issue is “impossible for me”.

While Finland’s Alexander Stubb today stated that the Eurogroup would not look into how Greece could potentially leave the eurozone, he said that the purpose of the meeting was to look at the short-term financial needs of Greece, and the role of Greece in the eurozone. 

But Stubb said that the eurozone would not be ready to ease Greece’s debt burden. “We have already done that in 2011-2012. Conditionality is not going to be softened,” he said.

The solidarity with Greece has been beyond what anybody could have been expected, the Finnish finance minister said. He added that 10% of his country’s annual €50 billion budget has gone to the debt-ridden southern European country. 

Luxembourg’s Pierre Gramegna pointed out that since his country is currently in charge of the rotating EU presidency, his job is to listen to everybody and see what is on the table. “I know debt restructuring is an important issue for the Greeks,” he said.

The Eurogroup meeting exposed divisions between the two Commissioners in charge of financial affairs and the euro, Pierre Moscovici and Valdis Dombrovskis. While the former said that Greece leaving the eurozone would be a collective failure, the latter declared that if the Greek government is unable to soon rebuild trust, “Grexit” can’t be excluded.

Background

A majority of Greeks on Sunday (5 July) voted "No" in the referendum on the country's proposed rescue package. A eurozone summit on Tuesday (7 July) will look into the fallout of the vote.

In Athens, thousands of jubilant Greeks waving flags and lighting fireworks poured into the city's Syntagma Square, as official figures showed 61% of Greek voters had rejected a deal the two sides had been close to reaching on 26 June.

>> Read: Greek ‘No’ inflicts heavy blow on EU

Timeline

  • 7 July: Eurozone summit.