Tuesday 20 March 2018

Deal or no deal? EU in denial over Greek plans

Eurozone ministers will arrange methods but will not agree figures

Protesters march through the streets on Thursday in Athens. Photo: Getty Images
Protesters march through the streets on Thursday in Athens. Photo: Getty Images

Jan Strupczewski in BRUSSELS

EUROZONE finance ministers are likely to agree tomorrow on a mechanism for aiding Greece financially, but will leave out any sums until Athens asks for them, an EU source said on Friday.

Policymakers have been debating possible financial support for the heavily-indebted state for more than a month, but have provided only words of support. Germany, key to any deal, has resisted appeals to promise aid.

Sources say tomorrow's meeting of the currency zone's 16 finance ministers would agree to make aid of up to €25bn available.

But a senior EU source with knowledge of preparations for the meeting said no numbers were likely yet.

"I think we should be able to agree on principles of a euro-area facility for coordinated assistance. The European Commission and the Eurogroup task force would have the mandate to finalise the work," the source said.

He said no figure had been agreed. "You would have a framework mechanism and you would have blank spaces for the numbers because there has been no request from Greece yet," the source said.

Greece has announced steps to reduce its budget deficit this year to 8.7 per cent of GDP from 12.7 per cent in 2009, triggering street protests and strikes but also reducing market concern over whether the country would be able to service its debt.

That helped Athens sell its bonds on debt markets earlier this month, but policymakers are still searching for ways of making its cost of borrowing more sustainable.

They are also concerned that the problems in Greece could undermine confidence in the euro and spread to other indebted eurozone countries such as Portugal or Spain.

The EU source said that among the aid instruments considered were both bilateral loans and loan guarantees.

"The preparations have been done under the Eurogroup by member states and the commission. The commission has done much of the technical work," the source said.

"The aim of the exercise so far has been to do the technical preparations, so that the political decision could be possible on Monday. Germany holds the key at the moment."

Polls show that public opinion in Germany is strongly opposed to bailing out Greece, which has for years provided unreliable statistics about the true size of its deficit and debt, breaking EU budget rules.

In a move that is likely to alleviate German concerns about spending money on Greece, the commission has said it would soon make a proposal for stronger economic co-operation between eurozone countries and tighter surveillance of their performance.

French Economy Minister Christine Lagarde told the Wall Street Journal she believed Greece's austerity moves were behind its improvement and negated need for a bailout.

"There is no such thing as a bailout plan which would have been approved, agreed or otherwise, because there is no need for such a thing," she said.

But she added that "technical experts" at the EU have been working on a contingency plan, so that if the need arose "all we would have to do is press the button".

A senior official at the EU executive was quoted as saying the eurozone members had agreed on "co-ordinated bilateral contributions" in the form of loans or loan guarantees if Athens was unable to re-finance its debts and called on the EU for help.

The agreement has been tailored to avoid breaking the rules governing the operation of the euro, and to avoid a challenge by Germany's supreme court.

A German ministry spokesman said he could not believe reports on the bailout plan were correct.

"We are not aware that this is being planned," he said, adding that Greece had not requested any aid. "Greece is implementing its (savings) programme and we expect that it will manage it alone."

Sunday Independent

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