Greece’s decision to give pensioners a one-off bonus has delayed the conclusion of its second bailout review but an agreement can still be reached in the coming months, EU Commission Vice-President Valdis Dombrovskis was quoted as saying on Saturday (17 December).
Greek Prime Minister Alexis Tsipras sparked a new row with Athens’ European creditors last week after announcing handouts including a surprise one-off payout of €600 million to 1.6 million low-income pensioners and a sales tax break for islands sheltering thousands of migrants.
On Wednesday (14 December), EU finance ministers suspended Greece’s debt relief, in a new setback in the debt crisis as the eurozone and the International Monetary Fund battle over how far to push Athens on implementing more tough policy reforms.
But the standoff revealed divisions at the heart of the eurozone, with French President François Hollande defending Greece at the EU summit on Thursday (15 December) and saying it should be “treated with dignity” and not forced to make even more of an effort.
The handouts announced by Tsipras should not significantly change Greece’s budget forecasts for 2017 or 2018, Athens’ European creditor institutions added.
The ESM, the eurozone’s bailout fund, said Athens should have consulted its creditors first and froze a short-term debt relief deal reached earlier this month.
“Certainly I wouldn’t describe the situation as a ‘dead-end’ but more turbulent than a few weeks ago,” Dombrovskis said in an interview with Greek newspaper Kathimerini. An agreement could be reached “in the coming months” if all sides acted “constructively”, he said.
“What complicated things is the unilateral announcement by the Greek government over the benefits for 2016-17, even though we understand the concerns and the purpose behind this move by the Greek government,” Dombrovskis said.
Greece has said it hopes to conclude its second review by early January at the latest but it remains at odds with its European and IMF lenders over fiscal targets and labour and energy reforms.
Dombrovskis said the “distance was not so big as not to be bridged.”
Greece wants to be included in the European Central Bank’s quantitative easing programme in the first quarter of next year and to regain market access by the end of 2017.
Tsipras said in a speech in Berlin to a congress of European leftist parties on Saturday that it was time for his country’s creditors to understand that the Greek people have made enough sacrifices.
Tsipras also said that Greece would not surrender to those who want Greece to permanently maintain austerity policies.
“Our creditors need to keep in mind that the Greek people have made enough sacrifices and now it’s time for them to fulfil their obligations,” he said. “We are decisive that we will never surrender our people to the ‘yes men’ who want Greece in the straitjacket of austerity for many years ahead.”
“We have delivered on our obligations and our creditors need to do their part,” he said. “I’m optimistic that Greece will achieve its goals. But we will never accept the logic of ‘eternal austerity’ that destroys Greek society.”