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
IMF managing director Christine Lagarde, during this morning's news conference in Tokyo.
IMF chief Christine Lagarde’s declaration this morning that Greece should be given two more years to hit tough budget targets embedded in its €174bn bailout programme – coming fast on the heels of German chancellor Angela Merkel’s highly symbolic trip to Athens – are the clearest public signs yet of what EU officials have been acknowledging privately for weeks: Greece is going to get the extra time it wants.
But what is equally clear after this week’s pre-Tokyo meeting of EU finance ministers in Luxembourg is there is no agreement on how to pay for those two additional years, and eurozone leaders are beginning to worry that the politics of the Greek bailout are once again about to get very ugly.
The mantra from eurozone ministers has been that Greece will get more time but not more money. Privately, officials acknowledge this is impossible. Extending the bailout programme two years, when added to the policy stasis in Athens during two rounds of elections and a stomach-churning drop in economic growth, means eurozone lenders are going to have to find more money for Athens from somewhere. Read more
With the European Commission holding its final summer meeting on Wednesday, Brussels goes on holiday in earnest starting next week, with nothing on the formal EU calendar until a meeting of European affairs ministers in Cyprus on August 29.
But if whispers in the hallways are any indication, veterans of the eurozone crisis remain traumatised by last August, when some inopportune comments by then-Italian prime minister Silvio Berlusconi shook Europe from its summer slumber. Indeed, Maria Fekter, Austria’s gabby finance minister, has already speculated on the need for an emergency August summit.
Herewith, the Brussels Blog posts its completely unscientific odds on which of the eurozone’s smouldering crisis embers could reignite into an out-of-control summer wildfire, forcing cancelled hotel bookings and return trips to Zaventem. Read more
Antonis Samaras. Getty Images
Leaders have begun arriving at their party caucuses and one of the first to show up at the centre-right EPP gathering was Antonis Samaras, the New Democracy leader locked in a neck-and-neck fight to become Greece‘s next
prime minister. Read more
People pass Bank of Greece in Athens last week
Jitters over whether Greece will be forced out of the euro have turned the focus of policymakers in recent days on whether Greece is on the precipice of a bank run.
It’s no mere academic exercise; a full-scale bank run would force the European Central Bank and eurozone lenders to either pump in more money – without a new government in place, and no assurances Athens would live up to the rescue terms – or pull the plug on Greece’s financial sector.
Since a banking sector without a central bank would essentially force Greece back to the barter system, there would be few options left then for Athens to begin printing its own currency again. Essentially, the drachma would return through the back door.
As we reported in today’s dead-tree edition, senior eurozone officials responsible for monitoring the currency area’s banking system said the rate of withdrawals thus far falls short of a panic. But the International Monetary Fund’s recent report on Greece makes it clear that a slow-motion bank run has been under way for more than two years, with close to 30 per cent of deposits being pulled out since the end of 2009. Read more
France's Nicolas Sarkozy has made EU borders an issue in his re-election campaign
The issue of the European Union’s passport-free travel zone has become a political hot potato again, thanks in part to Nicolas Sarkozy, who has warned during his presidential re-election campaign that France would withdraw from the border agreement unless more safeguards are adopted.
With just days before voting in the first round of the French election, Sarkozy’s government is pushing the issue back onto the EU agenda, this time with German assistance.
In a joint letter sent to the Danish presidency, Claude Gueant, the French interior minister, and Hans-Peter Friedrich, his German counterpart, are calling for countries to be granted the right to re-impose border controls unilaterally for 30 days if national authorities believe other countries – particularly on the EU’s southern and eastern frontiers – aren’t securing their borders.
A leaked copy of the letter Brussels Blog got its hands on (in French) can be read here. A look at the proposal (in English) after the jump… Read more
Poul Thomsen, head of the IMF mission to Greece
On Friday, after much of Europe shut down for the week, the International Monetary Fund issued its 231-page report on Greece’s new €174bn bailout, which seems to struggle to keep an optimistic tone about Athens’s ability to turn itself around over the course of the rescue plan.
But the IMF report is worth scrutinising for reasons beyond its gloomy prose: If there’s anyone who might force eurozone leaders back to the drawing board once again, it’s the IMF, which essentially pulled the plug on the first €110bn Greek bailout early last year when it became clear it wasn’t working.
Signs that the IMF is on a bit of a hair trigger litter the new report. Read more
Most of officialdom has been referring to the second Greek bailout, formally launched today, as a €130bn rescue. But the first 189-page report by European Union and International Monetary Fund monitors makes clear it’s actually a lot larger, though the actual size depends on how your measure it.
In the latest in our occasional series “We Read Brick-Sized Bailout Reports So You Don’t Have To”, Brussels Blog will attempt to explain why the figures have gotten so confusing and the bailout is probably better described as a €164.5bn rescue. Or maybe it’s €173.6bn.
The key thing to remember is that the first €110bn Greek bailout was originally supposed to run through the middle of next year and its remainnig funding will be folded into the new package and added to the €130bn in new funding. According to the report, €73bn of the first bailout has been disbursed, leaving about €37bn left.
But here’s where it gets slightly complicated. Read more
IMF's Lagarde, Eurogroup's Juncker and German finance minister Schauble at Thursday's meeting
The Greece crisis is entering a crucial week, with private investors deciding whether to participate in a €206bn debt restructuring and Greek officials scrambling to finalise reform measures to release the last €71.5bn in bail-out money in time for a eurozone finance ministers meeting Friday.
The failure of the ministers to sign off on all the aid during a meeting in Brussels on Thursday caught a few people by surprise. Over the weekend, Brussels Blog got its hands on the report by the troika – the European Union and International Monetary Fund team that monitors Greek compliance – showing where Athens came up short.
As we reported last week, the troika evaluation (a copy of which can be found here) held that Greece had completed most of the 38 “prior actions” ahead of Thursday evening, but had not yet fully implemented all of them, particularly in the area of so-called “growth-enhancing structural measures” – mostly a series of changes in wage and collective bargaining laws aimed at driving down costs. Read more
Ad appeared in the FT, International Herald Tribune, and Wall Street Journal's European edition
[UPDATE] The German version of the ad can be seen here via Twitter (thanks to blogger @TeraEuro for the link). It was in the mass-market daily Bild. And here’s the French version via Le Figaro (h/t @hbeaudouin).
With just days to go ahead of an expected Thursday meeting of eurozone finance ministers where they will finally give the green light to Greece’s €130bn second bail-out, a group of Greek businessmen has taken out advertisements in a wide range of international newspapers to plead their country’s case.
According to a spokesman for the group, which calls itself “Greece is Changing”, the ads were rushed into print by a group of like-minded business leaders and designed by Peter Economides, the acclaimed marketing strategist who, among other things, helped develop the “Think Different” campaign for Apple in 1997.
Economides, born in South Africa of Greek émigrés, has been on a campaign to get Greece to “rebrand” itself for months, and the ads ran in three English-language newspapers – the FT, International Herald Tribune and the Wall Street Journal’s European edition – as well as German, French and Dutch papers. (Dutch blogger Michiel van Hulten posted the version that ran in NRC Handelsblad here.) Read more
Greece's Lucas Papademos, flanked by Greek and French finance ministers, at Monday's meeting.
The 10-page Greek debt sustainability report that we obtained Monday night is filled with very sobering conclusions that we highlighted in our news story that’s now up on the web.
But the document – prepared by analysts in the so-called “troika” of international lenders, the European Central Bank, European Commission, and International Monetary Fund – is filled with so much interesting data, that we thought we’d give it further airing here at the Brussels Blog.
The report, marked “strictly confidential” and dated February 15, starts with a page-long summary that includes arguably the most revealing paragraph in the entire document: Read more
Lead negotiators for Greek bondholders, Charles Dallara and Jean Lemierre, outside the Greek prime minister's office last month.
This morning, the dead tree edition of the FT has a story based on some leaked documents we got our hands on regarding the massive Greek debt restructuring that needs to begin in a matter of days.
The documents make clear the schedule is slipping dangerously; the meeting of eurozone finance ministers tonight that has been cancelled was supposed to approve the launch of the restructuring so the process can begin Friday. The whole thing needs to be done before a €14.5bn Greek bond comes due for repayment March 20. Time is running out.
But perhaps more interestingly is the fact that eurozone finance ministries asked for financial advice from New York financial advisors Lazard and legal advice from the New York firm of Cleary Gottlieb Steen & Hamilton about what the consequences would be if they launched the debt restructuring – but were forced to scrap it after it had started.
As is our tradition, we thought we’d give Brussels Blog readers a bit more on what the documents had to say. Read more
Dutch EU Commissioner Neelie Kroes: "No ‘man overboard’ if we lose someone from eurozone."
[UPDATE 2] Dutch finance minister Jan Kees de Jager was asked about Kroes’ comments during the government’s regular parliamentary question time Tuesday. De Jager said that while the contagion risk in the eurozone has decreased over the last year because of measures taken in Brussels, a Greek exit would still be very costly.
[UPDATE] In response to Kroes’ comments, Olivier Bailly, an EU Commission spokesman, today insisted its policy towards keeping Greece in the euro has not changed.
José Manuel Barroso, the European Commission president, may have promoted his economic chief Olli Rehn to vice president last year with new responsibilities for managing the eurozone crisis, but in recent days a growing number of other commissioners seem to be elbowing in, opining on whether Greece will leave the single currency.
On Monday came an interview with Greece’s own commissioner, Maria Damanaki, where she told the newspaper To Vima tis Kyriakis that contingency plans for Greece leaving the euro were being “openly studied”. “Now they’re not simply scenarios,” said Damanaki, whose portfolio is fisheries. “They are alternative plans that are being openly studied.” Rehn’s spokesman insisted that no such plans were afoot within the commission, although he acknowledged some in the private sector were making such calculations.
This morning, however, comes another broadside, this time from Neelie Kroes, the European commissioner from the Netherlands – one of the eurozone’s remaining triple A-rated countries where support for more aid to Greece is dwindling. Read more
Greek government employees protest against austerity measures in Athens on Friday.
As the week comes to an end, we seem no closer to a deal to sort out Greece’s troubles than we were when it started. With rumours of a deal a daily (hourly?) occurrence, and questions over whether eurozone finance ministers will meet Monday to sign off on a new €130bn bail-out, Brussels Blog thought we’d revive our popular “viewer’s guide to the Greek crisis” to lay out the state of play for those not following the negotiations on an hourly basis.
The best way to think of what is currently happening in Greece is to look at it as the proverbial row of dominoes that must fall before a deal is complete. Unless they all fall in order, Athens is at risk of missing payment on a €14.5bn bond due March 20, which could lead to a messy default and renewed chaos across the eurozone.
The first domino has basically been complete since last weekend: a deal with private holders of Greek bonds to wipe off €100bn from Athens’ €350bn debt load.
As we reported on Monday, a consortium of private Greek debt holders has agreed to accept new bonds that are be worth half the face value of their current bonds (including a one-time cash payment). The new bonds would have low interest rates that would reduce their value even more. According to our sources, the “haircut” in the long-term value will be just over 70 per cent.
But there are two more dominoes that must still fall: Greece must (yet again) agree to new austerity measures being urged by the “troika” of international lenders –European Commission, European Central Bank and International Monetary Fund – and then Brussels must decide on how to fund any shortfall. Read more