Finishing touches to Greek bailout
GREECE and international creditors were attempting to put the finishing touches to a multibillion-euro bailout accord yesterday to keep the country financially afloat and meet an important debt repayment to the European Central Bank (ECB) within days.
Germany set out “strict” conditions for further aid and said it would be sensible to link the size of the first tranche to Greece’s progress carrying out reforms, a reflection of worry in the euro zone that Athens may not do as it has promised.
Greek ministers and representatives of European institutions and the International Monetary Fund resumed talks yesterday after a marathon Sunday session that ended in the pre-dawn hours.
An accord for up to € 86 billion (R1.19 trillion) in new loans to the debt-stricken nation must be in place by August 20, when the repayment to the ECB is due. Greek bond yields fell as hopes grew of a speedy end to talks.
An agreement will mark the end of a painful chapter of bailout talks for Greece. The country fought against austerity terms demanded by creditors for much of the year before accepting a deal under threat of being removed from the euro zone.
Greek officials had earlier said they hoped to conclude negotiations with creditors by early today at the latest. The European Commission said it expected a deal this month.
“A deal could be reached in August, preferably before August 20,” European Commission spokeswoman Annika Breidthardt said.
Greek banks could get an initial capital injection soon after a bailout deal is clinched, as much as € 10bn, even before the ECB completes a stress test, a euro zone official familiar with the issue said yesterday.
The official, who asked not to be named, said a test might not be finished before October but that Greek banks needed urgent capital to normalise their operations.
Germany stressed its wish yesterday for “quality before speed” in the negotiations, threatening to slow down the process as it pressed for strict conditions to be linked to aid.
Popular misgivings run deep in Germany – the euro zone country that has already contributed most to Greece’s two bailouts since 2010 – about funnelling yet more money to Athens.
Strict terms
Germany wants a deal that includes an ambitious budget plan, a credible privatisation strategy and sustainable pension reform by Greece, said finance ministry spokesman Juerg Weissgerber in Berlin.
“It is sensible – that is our belief – to fix the size of the first payment tranche to the extent of the reforms implemented. That means strict conditionality for financial help,” he said.
Weissgerber said Germany was not involved in the negotiations and would need time after any deal to review the results.
“We are ready to do this examination quickly this week if necessary, but quality comes before speed,” he said.
Greek media reported that things that must be completed for aid to be released included scrapping tax breaks for farmers who now receive subsidised fuel; tighter regulations on individuals owing back taxes to the state; and a gradual increase in a “prepaid” income tax mechanism that asks taxpayers to cough up lump sums on forecast income.