Greece, eurozone fail to OK fund-release deal
But sides say accord for free-up of $2.2B is likely imminent.
Greece failed to convince European creditors Monday to release vital bailout funds to shore up the country’s public coffers and its crippled banks, but hopes are high that a deal will be concluded within a week.
Though the Greek government has met many of the conditions attached to the country’s third international bailout, it still needs to push through some financial reforms, notably how to deal with those in arrears on their mortgages and the bad loans held by banks.
“There are open issues,” Jeroen Dijsselbloem, the eurozone’s top official, said after a meeting of the bloc’s 19 finance ministers. Dijsselbloem said he hopes agreement on these remaining issues can be agreed on in the “coming days.”
Greece is due 2 billion euros ($2.2 billion) from its bailout as well as 10 billion euros already set aside for the country’s banks, who are reeling from capital controls and another likely recession.
But it needs to pass a series of economic reform measures to get the money from the three-year 86 billion-euro ($93 billion) bailout program agreed on this summer in the face of potential economic collapse.
Greece’s finance minister, Euclid Tsakalotos, said he was hopeful the Greek government would meet creditor demands over issues relating to Greek banks and bad debts within the timeframe outlined by Dijsselbloem.
“I have every expectation that we will have very good news by this time next week,” he said.
The Greek banks are perhaps the most pressing concern facing the Greek government. They remain badly hobbled by the crisis that played out over the country’s euro future in the first half of the year.
They need cash and fast so they can start operating normally — the most visible sign that they are nowhere near normal is that cash withdrawals remain confined to a paltry 60 euros ($64.53) a day or 420 euros ($451.71) a week.
Last month, the European Central Bank said Greece’s banks need 14.4 billion euros in fresh money to get back on their feet and resume normal business. That’s actually lower than many had anticipated. Up to 25 billion euros is available from the bailout.
Klaus Regling, the head of the European Stability Mechanism, the institution that actually pays out the bailout cash, said the smaller capital shortfall means Greece’s latest rescue will “very likely” be less than the up-to-86 billion euros initially foreseen.
“That’s good news for Greece because it means the debt increase will be less and also good for ESM as we keep more remaining firepower,” he said.
Greece’s European creditors have already put aside 10 billion euros into a special account managed that can be made available to Greece “relatively quickly,” but only after conditions are met.
“We hope that this can happen in the course of this week,” he added.
The bank recapitalization has to be completed by the end of the year as new rules are set to be introduced in 2016 that will mean depositors with over 100,000 euros in a bank will have to contribute to the bank’s rescue.
Given the amount of pain that would inflict on Greeks who are already struggling with recession and high employment, it’s a scenario the Greek authorities would like to avoid.
Greece has relied on bailout funds from its eurozone partners and the International Monetary Fund since the spring of 2010 and is heading back into recession after the government imposed painful controls on money transfers in late June, when it appeared the country was hurtling toward euro exit.
Once the promised reforms have been passed and the bank recapitalization has taken place, discussions between Greece and its creditors can move on to how to lighten Greece’s public debt load.