Greece back in focus
Europe turns attention to unlocking funds for Greece after failed summit
BRUSSELS: European policy makers turned their attention to unlocking funds to keep Greece solvent after a summit failed to agree on a sevenyear budget for the bloc.
Euro-area finance ministers held a conference call today to prepare for their third meeting this month, on Nov 26, on Greece’s rescue. As with the budget talks for the 27-nation European Union, euro finance chiefs have deadlocked on a plan to steer the country back to fiscal health.
“There’s no time to waste” in finding a solution for Greece, German Chancellor Angela Merkel told reporters yesterday in Brussels. A plan “is being intensively worked on,” she said.
An agreement, which would release an aid payout of at least 31 billion euros (US$40bil), may raise Greece’s debt target to 124 % of gross domestic product in 2020 from a previous goal of 120%, a Greek official said Nov 22.
The cost of reaching the new target from a currently projected trajectory of 129% of GDP that year is about 10 billion euros, according to the official.
The main obstacle to clearing the loans for Greece is a plan to reduce the interest rates charged by euroarea creditors. A cut in interest rates would put them below the cost of funding for some of the 17 euro-area countries, the official told reporters in Brussels.
The latest chapter in the Greek economic crisis that opened in 2009 was triggered by the ministers’ decision to extend by two years, to 2016, the deadline for Greece to cut its budget deficit to 2% of gross domestic product. The extra time drove its projected debt higher, stirring tensions with the International Monetary Fund.
The IMF has provided about a third of 148.6 bil euros in loans funneled to Greece since 2010.
European leaders have praised Greek Prime Minister Antonis Samaras’s efforts to implement austerity measures, marking a turnaround from the doubts they’d previously expressed that Athens hasn’t been holding up its end of the bailout deal.
The impasse that has held up the latest aid payment since June was echoed at the budget summit that ended on Friday.
National chiefs plan another summit early next year to forge a deal between countries including Britain and Germany that want to cut subsidies and lesser-developed southern and eastern economies clamoring for EU investment.
“Anything short of admitting that our talks have been extraordinarily complex and difficult would not reflect reality,” Jose Barroso, head of the European Commission, which manages the subsidy programs, told reporters after a two-day meeting in Brussels.
Britain’s defence of its cash-back guarantee and France’s clinging to farm aid gave the summit the flavor of EU negotiations in the 1970s or 1980s, diluting efforts to equip Europe with a budget to make it more competitive.
Eastern and southern countries said reduced financing for publicworks projects would condemn them to lag behind the wealthier north.
In the absence of an accord by late 2013, the EU would roll over its annual budget.
At stake is a spending plan for the years 2014-2020 that would total about 1% of EU-wide GDP.
While that sum is paltry compared to the average 50% of GDP that each country spends inside its borders, the political resonance is far larger. — Bloomberg