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28/09/2016

‘Happy surprise’ as Greece receives invitation to join BRICS bank

Global Europe

‘Happy surprise’ as Greece receives invitation to join BRICS bank

Alexis Tsipras arrives for a national press briefing after the European Council meeting in Brussels. 20 March, 2015.

[European Union]

Greece has been invited to become a member of the development bank of the BRICS economies, including Russia and China, which is seeking to become a counterweight to the IMF, a move welcomed by Prime Minister Alexis Tsipras as “a happy surprise”.

Greece has been invited to become a member of the development bank of the BRICS economies, including Russia and China, which is seeking to become a counterweight to the IMF, a government source said on Monday (11 May).

The invitation came during a telephone conversation between Greek Prime Minister Alexis Tsipras and Russia’s deputy finance minister Sergei Storchak, the government source said in a note to the media.

The announcement came late on Monday, as Greece was meeting with its eurozone partners in Brussels to try reach a deal with its EU-IMF creditors that would release the €7.2 billion remaining in its bailout programme, which expires at the end of June.

Tsipras called the bank’s invitation “a happy surprise” and expressed interest, saying he would “study the proposal in detail”, the statement said.

The BRICS – Brazil, Russia, India, China and South Africa – had announced last July that they were creating a new bank, based in Shanghai, aimed at financing major infrastructure projects in emerging countries. But it was also seen as a move to shake up global economic governance, dominated by the International Monetary Fund and the World Bank.

>> Read: BRICS launch ‘New Development Bank’

The Greek premier will discuss the BRICS bank with top representatives at an economic forum in Saint Petersburg on 18-20 June, the source added.

Slow progress at Eurogroup

Meanwhile, Greece won limited support from the eurozone on Monday for the progress it has made in difficult bailout talks.

Eurozone finance ministers meeting in Brussels kept their tough line, saying Greece could not hope for any of the final €7.2 billion tranche of its €240 billion EU-IMF bailout until they make key reforms.

“We welcomed the progress that has been achieved so far… At the same time, we acknowledged that more time and effort are needed to bridge the gaps on the remaining open issues,” the Eurogroup statement said after talks in Brussels.

https://youtube.com/watch?v=CrEu9qJDAq8

Greek Finance Minister Yanis Varoufakis – leading the charge for the anti-austerity government of Prime Minister Alexis Tsipras – admitted that Athens faced an imminent crisis.

“The liquidity issue is a terribly urgent issue. It’s common knowledge, let’s not beat around the bush,” said the shaven-headed Marxist economics professor, who has been at loggerheads with his more free market-oriented international counterparts.

“From the perspective (of timing), we are talking about the next couple of weeks.”

Punishing repayments

Greece faces a punishing debt repayment schedule in coming weeks, owing another €1.5 billion to the IMF in June, and then another three billion euros to the European Central Bank (ECB) in July and August.

Athens has been squeezing funds from the central and local governments to be able to meet its payments, but mayors are beginning to resist.

Led by Germany, the Europeans still expect a rigorous regime of reforms from Athens including cuts to pensions, but Tsipras’s leftist government in power since January has so far refused to deliver on the terms of the bailout.

Eurogroup chief Jeroen Dijsselbloem insisted that a full deal was needed for Greece to get its remaining bailout funds, but raised the possibility of breaking up the reform programme into steps and then making staggered disbursements.

But the eurozone needed “more detailed proposals” from Greece, the Dutchman said, adding there was “a lot of work behind the scenes in Athens that needs to be done.”

EU Economic Affairs Commissioner Pierre Moscovici said that on issues like pensions and the labour market, Greece had to make “alternative proposals for areas of programme that it rejects”.

Varoufakis said he hoped for a deal in coming days.

Background

On 20 March, the European Commission offered Greece funds to deal with what it called a humanitarian crisis, after Prime Minister Alexis Tsipras vowed to clarify bailout reform pledges demanded by creditors.

Following crisis talks between Tsipras and European leaders, EU Commission chief Jean-Claude Juncker said he was making available €2.0 billion in unused EU structural funds to Greece.

>> Read: Greece promises to deliver full reform list after three-hour 'mini summit'

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

>> Read: Eurozone approves Greek reform plan with reservations

Germany's rejection of an initial Greek request for a six-month loan extension forced Athens into a string of politically sensitive concessions, postponing or backing away from campaign promises to reverse austerity, scrap the bailout and end cooperation with the Troika of EU, ECB and IMF inspectors, which are now called "the institutions".

>> Read: Greece, eurozone agree to four-month loan extension, avert crunch

Further Reading