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09/12/2016

Germany’s Schäuble says ministers to discuss Greek credit line

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Germany’s Schäuble says ministers to discuss Greek credit line

Wolfgang Schäuble. European University Institute, March 2012.

[EUI/Flickr]

Eurozone finance ministers will discuss in early December conditions for providing Greece with credit when its current aid programme expires, German Finance Minster Wolfgang Schäuble said on Sunday.

Greece wants to quit the international bailout programme by the end of the year, but has been at loggerheads with its lenders, the troika of the European Commission, International Monetary Fund and European Central Bank, over Greece’s projected budget shortfall next year.

“At the moment, the troika and Greece have to determine whether Greece has fulfilled the conditions for the payment of the final tranche of the current programme,” Schäuble told German public broadcaster ARD.

“Then we have to see what is necessary for next year after the current programme has expired. Greece is in a better position than we assumed two years ago, but it needs support on financial markets, so the thinking is in terms of a precautionary credit line, with certain conditions attached.”

>> Read: Greece resumes talks with lenders to exit bailout

Eurozone finance ministers will discuss the issue in Brussels the week after next, he said.

In early November, the ministers backed a credit line that would draw on 11 billion euros already granted to Athens to recapitalise Greek banks, but never used.

Greece is running short of time to reach a deal on its final troika review by an 8 December deadline, after talks in Paris ended last week without a solution.

Greek officials said the two sides were at odds over a 2015 fiscal gap, with the troika demanding further austerity measures, including a tax rise in the tourism sector.

>> Read: Study: Austerity driving Greeks to commit suicide

Athens has acknowledged a risk of delay to its plan to exit from the bailout by the end of the year, but after five years of belt-tightening, it has ruled out imposing extra austerity cuts and hopes that an early bailout exit will boost its popularity.

Officials from the co-ruling PASOK party said on Sunday that the troika review would be finished on time.

“The negotiations are tough and unfold on several levels, but it will be completed in time … without pension and wage cuts,” the PASOK officials said on condition of anonymity.

Der Spiegel reported on Sunday that there were two types of precautionary credit line that Europe could extend to Greece, and that the one with the stricter conditions would apply to Greece.

The Finance Ministry declined to comment.

Background

After two international bailouts totalling 240 billion euros since 2010, when private investors refused to lend to Athens any more, Greece wanted to switch back to market financing from the start of next year, instead of 2016 as originally planned.

But markets reacted nervously to the plan, worried that Athens would no longer have any financial backup. Greek benchmark 10-year bond yields rose to 8.9% in late October from 5.6% in early September.

Eurozone finance ministers backed a precautionary credit line for Greece on 6 November, which would be needed after the country eventually exits its bailout at the end of the year.

Further Reading