Greek finance minister Stournaras, left, with IMF chief Lagarde at Monday's eurogroup meeting
In an interview with five European newspapers published Thursday, Jeroen Dijsselbloem, the Dutch finance minister who heads the committee of eurozone finance ministers, said his eurogroup will need to look at whether Greece needs additional bailout aid in April 2014.
This will surprise some members of the troika, particularly the International Monetary Fund, who were pushing for a reckoning much more quickly amid signs the €172bn second Greek bailout is running out of cash much sooner than anticipated.
Once the €3bn in EU aid contained in a new €4.8bn tranche approved this week is paid out, total EU outlays will reach €133.6bn — out of a total €144.6bn committed (the IMF puts up the rest). So just €11bn left in the EU’s coffers. Further evidence that cash is leaving too quickly is contained in the latest report on Greece’s rescue prepared by the European Commission, which our friends and rivals at Reuters obtained and helpfully posted for everyone to see.
As Brussels Blog noted earlier, there is no more EU cash left in the programme for the second half of next year, even though the bailout was originally supposed to contain enough until the end of 2014. But this chart in the new report makes clear that cash may run out even quicker than that: Not only is the third and fourth quarters of 2014 completely unfunded, now there’s only €1.5bn left for the second quarter, too. Read more
Greek prime minister Antonis Samaras, centre, holds a cabinet meeting this week.
Just how off track is Greece’s €172bn second bailout? When the FT reported that a new €3bn-€4bn financing gap had opened up in the programme, EU and International Monetary Fund officials went out of their way to insist there wasn’t a gap at all.
“There is no financial gap. The programme is fully financed for at least another year, so there is no problem, on the premise that we reach a final agreement on the review in July,” said Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup.
IMF spokesman Gerry Rice weighed in with a written statement: “If the review is concluded by the end of July 2013, as expected, no financing problems will arise because the program is financed till end-July 2014.”
Notice the caveats, however. Both Dijsselbleom and Rice say there won’t be a shortfall – as long as the IMF is able to distribute its next €1.8bn aid tranche before the end of July. Why? Because of the new financing gap, which means the Greek programme essentially runs out of money in July 2014. The IMF must have certainty that Greece is fully financed for 12 months or it can’t release its cash, so after July, it must suspend its payments. Read more
Finance ministers MIchael Noonan of Ireland, center, and Vito Gaspar of Portugal, right, with the EU's Olli Rehn at January's meeting.
After Greece last year won a restructuring of its €172bn rescue that included an extension of the time Athens has to pay off its bailout loans, Ireland and Portugal decided they should get a piece of the action, too.
So at the January meeting of EU finance ministers in Brussels, both Dublin and Lisbon made a formal request: they’d also like more time to pay off their bailout loans. According to a seven-page analysis prepared for EU finance ministry officials a few weeks ago, though, the prospect is not as straight forward as it may seem.
The document – obtained by the Brussels Blog under the condition that we not post it on the blog – makes pretty clear that while an extension might help smooth “redemption humps” that now exist for Ireland (lots of loans and bonds come due in 2019 and 2020) and Portugal (2016 and 2021), it’s not a slam dunk case. Read more
Greek prime minister Samaras takes questions after last month's EU summit in Brussels.
When eurozone leaders finally reached agreement on an overhauled €173bn bailout of Greece last month, Antonis Samaras, the Greek prime minister, declared the prospect of his country leaving the euro to be over: “Solidarity in our union is alive; Grexit is dead.”
But late on Friday, someone decided to resurrect it: the International Monetary Fund. In its first report on the Greek bailout since last month’s deal, the IMF was unexpectedly explicit on the risks that Greece still faces, including the potential for full-scale default and euro exit.
In fact, the 260-page report includes a three-page box explicitly dedicated to examining the fallout if Greece were to be forced out of the euro, which we’ve posted here. The box, titled “Greece as a Source of Contagion”, concludes that while the eurozone has improved its defences, it still remains hugely vulnerable to shocks that would come following Grexit. Read more
IMF chief Christine Lagarde arrives at Monday's eurogroup meeting where Greek deal was struck.
When eurozone finance minsters announced their long-delayed deal to overhaul Greece’s second bailout early Tuesday morning, there was much they didn’t disclose.
The most glaring was how big a highly-touted bond buyback programme would be, a question dodged repeatedly at a post-deal news conference. But there were other things that were left out of a two-page statement summing up the deal, including how much the European Central Bank was making on its Greek bond holdings, profits that will be returned to Athens as part of the agreement.
It turns out, those were not the only – or even the biggest – unanswered questions left after the early-morning deal. As we report in today’s dead-tree edition of the FT, ministers failed to find enough debt relief measures to get to the purported Greek debt target of 124 per cent of economic output by 2020, far above the 120 per cent target set in February.
In reporting our story, we relied heavily on a leaked chart that we got our hands on (which we’ve linked to here) that lays out in great detail the assumptions built into the new programme. A quick review of the chart comes after the jump… Read more
Germany's Schäuble and France's Moscovici after the 1st attempt this month to reach a Greek deal.
Eurozone finance ministers have begun arriving at the EU’s summit building in Brussels for their third meeting in two weeks to try come up with a deal to get Greece’s overweening debt levels back down to levels that can credibly be considered sustainable.
For those who need a reminder of where the talks stand, we offer a handy official chart we got our hands on (see it here) which shows just how big the debt gap is – a gap that must be closed to finalise the overhauled programme and release the long-delayed €31.3bn in bailout assistance.
The key thing to remember is the last time the eurozone revamped the Greek programme in February, they agreed that it would return Athens to a debt level of 120 per cent of economic output by 2020. This has become a de facto benchmark.
As the chart shows, without any debt relief, Greece’s debt is now expected to be at 144 per cent by 2020 and the entire debate today (and possibly tonight) will be on who will give up some share of Greek debt repayments to bring that down. Read more
Greek finance minister Yannis Stournaras, left, and IMF chief Lagarde at Monday's meeting.
It may be incomplete and its conclusions subject to debate, but on Monday night eurozone finance ministers got a draft copy of the much anticipated troika report on Greece. As we report online, there’s not much in it we didn’t already know – including the fact Greece will need as much as €32.6bn in new financing if the programme is extended through 2016.
But the language in the report is, as usual, pretty revealing. We’ve posted a copy of the draft here. It makes clear that eurozone creditors will be leaning on Greece pretty heavily for the foreseeable future. This, in spite of the fact the Greek parliament barely passed €13.5bn in austerity measures last week amidst serial defections form its governing coalition.
The most glaring is that Athens will have to find an additional €4bn in austerity measures for 2015 and 2016, meaning the pain isn’t done yet. But it also implies there are some more shorter-term measures that haven’t been completed yet that the troika is expecting.
Greece has revamped its reform effort and fulfilled important conditions…. These steps, which have tested the strength and cohesiveness of the coalition supporting the government, leaving also some scars therein, significantly improve the overall compliance, provided some remaining outstanding issues are solved by the authorities.
Greek finance minister Stournaras, left, and prime minister Samaras during last night's debate.
Tonight’s meeting of eurozone finance ministers was, as recently as a week ago, thought to be the final bit of heavy lifting needed to complete the overhaul of Greece’s second bailout. After all, Athens has done what it promised: it passed €13.5bn of new austerity measures on Wednesday and the 2013 budget last night.
But EU officials now acknowledge that the Brussels meeting of the so-called “eurogroup” will not make any final decisions on Greece amid continued debate over how much debt relief Athens needs – and how fast it should come. That means a long-delayed €31.3bn aid payment will be delayed yet again.
One EU official said that despite hopes, the key part of a highly-anticipated report from international monitors – known as the “troika report” because it is compiled by the European Central Bank, International Monetary Fund and European Commission – will not be ready in time for tonight’s meeting: the debt sustainability analysis, which remains a point of contention. Read more
A woman walks by Greek anti-bailout graffiti in central Athens earlier this week.
For those who really want to get into the nitty gritty of the revised Greek bailout, we’re also posting two other documents we got our hands on and used for today’s story on the nearly-completed deal in order to provide more detail on what the new rescue programme will look like.
The first document is an October 14 draft of the official “Memorandum of Understanding on Specific Economic Policy Conditionality”; the second is the “Memorandum of Economic and Financial Policies”.
Both are chock full of austerity and reform commitments Athens is making to get the bailout extension. But the second memorandum has far more detail on what kind of budget demands Athens is agreeing to. Although there are gaps where specific budget targets are to be included, page two and page nine give strong hints of where they are headed. Read more
Germany's Angela Merkel, left, with Greece's Antonis Samaras during her Athens visit.
With Athens and the so-called “troika” of international lenders close to a deal on an overhauled bailout that would extend the programme by two years, the focus today shifts to Brussels, where talks begin on round two of the revised Greek rescue: how to pay for it.
As we reported in today’s dead-tree edition of the FT, those talks will focus on how to fill a new financing gap of between €16bn-€18bn through 2016.
Although officials have toyed with a bond buyback programme – which would have reduced Greek financing needs by purchasing debt at current distressed prices and retiring the bonds – it now looks like they’re going to focus instead on what they’ve done in the past: lowering rates on bailout loans even further to scrape together extra money. Currently, Greece borrows at 1.5 per cent more than the cost of the cash to lenders. So there’s room to cut. Read more