GREECE received a stark warning yesterday about the cost of the latest bailout in comments which were likely to send a chill down the spines of citizens in other countries that may need further bailouts.
"The sovereignty of Greece will be massively limited," Eurogroup chairman Jean-Claude Juncker told Germany's 'Focus' magazine in the interview released yesterday. "One cannot be allowed to insult the Greeks. But one has to help them. They have said they are ready to accept expertise from the eurozone," the Luxembourg prime minister added.
Like the Irish, the Greeks are acutely sensitive to any infringement of their sovereignty and any suggestion that foreign "commissars" might become involved in running the country is an incendiary political issue and could trigger more street protests.
The comments came hours after eurozone finance ministers, including Michael Noonan, approved a €12bn instalment of Greece's bailout and signalled in the teleconference that Athens must expect significant losses of sovereignty and jobs.
The finance ministers gave the go-ahead for the fifth tranche of Greece's €110bn financial rescue agreed last year and said details of a second aid package for Athens would be finalised by mid-September.
The latest tranche of cash will be paid by July 15, as long as the IMF's board sign off on the disbursement. The IMF is expected to meet on Friday to approve it.
The IMF signaled a readiness to approve its €3.3bn share of the next aid instalment for Greece. "We look forward to continue working with the Greek authorities and the European partners in support of the economic programme that will contribute to restoring fiscal sustainability," the Washington- based fund said.
The payment will allow Greece to avoid the immediate threat of debt default but the country still needs the second rescue package, which is also expected to total around €110bn.
Between now and then, finance ministers will work on the "precise modalities and scale" of private creditors' involvement.
Germany hopes this will eventually total around €30bn, with banks voluntarily buying new Greek bonds when old ones they hold mature, meaning Athens would not have to produce cash to repay its creditors immediately. Mr Juncker also said Greece must privatise on a scale similar to the sell-off of East German firms in the 1990s.
"For the forthcoming wave of privatisations they will need, for example, a solution based on a model of Germany's 'Treuhand agency'," Mr Juncker said, referring to the privatisation agency that sold off 14,000 East German firms between 1990 and 1994. (Additional reporting Reuters and Bloomberg)