Wednesday 16 August 2017

EU ministers seek Greece solution but say it won't be needed

Greece's Finance Minister George Papaconstantinou (left) arrives with his French counterpart Christine Lagarde and Belgian counterpart Didier Reynders at an Eurogroup finance ministers meeting at the EU Council in Brussels yesterday
Greece's Finance Minister George Papaconstantinou (left) arrives with his French counterpart Christine Lagarde and Belgian counterpart Didier Reynders at an Eurogroup finance ministers meeting at the EU Council in Brussels yesterday

Sarah Collins in Brussels

GREECE will be charged punitive costs on top of market rates if it goes to its eurozone neighbours for a loan, Dutch finance minister Jan Kees de Jager said ahead of a eurozone finance ministers' meeting in Brussels yesterday.

In a positive sign that EU countries are set to work out the details of emergency aid to the plagued Mediterranean state, he said any rescue package would follow the lines set out by the IMF.

The IMF lends to countries having trouble meeting their debt repayments on financial markets, but exacts promises of strict budget cuts in return.

"This is not a bailout, because a bailout is kind of free ride or a low-cost ride for Greece," de Jager told reporters ahead of the meeting of eurozone finance ministers.

"We will require effective spreads... on top of the costs of funding so there will be an incentive for Greece to refinance through the markets instead of by bilateral loans."

The loans would most likely come from Germany or France, but ministers are also looking at ways of guaranteeing Greek debt, which would involve other countries.

Finance ministers were last night discussing a framework for assistance to Greece, while insisting they do not think Athens will need it.

"We will try to find a workable solution on Greece," Luxembourg's Jean-Claude Juncker, who is leading the group of finance ministers, said before the meeting.

"(But) I don't think we will need one," Mr Juncker said. "The final decision will lie with the European Council," (heads of government) he said.

German Finance Minister Wolfgang Schaeuble and France's Christine Lagarde ruled out an aid decision at the meeting, amid hopes that €4.8bn in budget cuts would allow Greece to continue to borrow what it needs on the markets.

The ministers may have been just as interested in surprise criticism of German economic policies from Ms Lagarde.

Breaking a convention that Paris and Berlin do not argue about policy in public, she voiced the widespread concerns that German export-driven policy threatens the stability of the eurozone.

"Could those with surpluses do a little something? It takes two to tango.

"It cannot just be about enforcing deficit principles," she said.

"Clearly Germany has done an awfully good job in the last 10 years or so, improving competitiveness, putting very high pressure on its labour costs.

"When you look at unit labour costs to Germany, they have done a tremendous job in that respect.

"I'm not sure it is a sustainable model for the long term and for the whole of the group. Clearly we need better convergence," Ms Lagarde said.

Some European politicians have also been shocked by the proposal from Mr Schaeuble that countries with persistent deficits should leave the single currency.

"Such a prospect by itself will create a wholly new level of discipline," Mr Schaeuble said.

Mr Juncker, the only political leader left from the generation that created the currency in 1999, said he opposed such a "radical" step.

Meanwhile, EU Economy Commissioner Olli Rehn said he was ready to lay out a general "European framework for co-ordinated and conditional assistance".

Measures

"The hope seems to be, we'll let the Greeks take measures and hope the problem will go away," Andre Sapir, an economics professor at the Universite Libre de Bruxelles, said.

"That is not a very reasonable view of the world. It does look likely that indeed Greece will need some resource," he said.

Meanwhile, Dutch Finance Minister Jan Kees de Jager said: "Greece has to solve its own problems as to the government debt, and after that it is possible that we will take measures in a co-ordinated way."

For the Netherlands, it was important that conditions were attached to any loan or guarantee so there was no "free ride, or low-cost ride" for Greece, Mr De Jager said.

Irish Independent

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