Friday 15 December 2017

Eurozone leaders at odds over Greek deal

Louise Armitstead and Bruno Waterfield in Brussels

European leaders were struggling last night to reach a deal on a Greek rescue as politicians doggedly refused to either lower Athens's debt targets or boost the €130bn bailout fund.

Members of the eurogroup promised a deal would be done but the talks ran into the night in a tug-of-war battle over the yawning gap in Greece's finances.

There were more violent protests in Athens as Greek democracy and sovereignty appeared to be being carved up by demands from individual European countries.

Northern European "hardliners", including Holland, Germany, Austria and Finland, demanded a "permanent representation" of the troika in Athens, so officials from the European Union, the European Central Bank (ECB) and the International Monetary Fund (IMF) can run Greek finances.

Dutch Finance Minister Jan Kees De Jager said: "I'm in favour of more control, more supervision, a more permanent presence of the troika, as well as a kind of escrow mechanism, in order to establish more control in Athens of the money itself."

The hardliners want the bail-out funds, which are needed to avert a Greek default on March 20, to be placed in an escrow account out of Athens's reach to ensure interest payments take priority over government spending.

However, Greece pleaded to retain control of its finances, offering to introduce a new law giving interest payments priority.

Last night, eurozone officials admitted there was a shortfall in funds, with the Greek debt ratio hovering at around 124pc, four points above the IMF target.

The IMF has insisted the second bailout must aim to reduce Greek debt to 120pc of GDP by 2020, a target that has slipped by 9pc in just four months as the economy has plunged. Without IMF involvement, eurozone members will have to pay more, which is politically impossible for many.

Three options

The eurogroup debated three options to reduce the Greek debt burden without boosting the funds. If the ECB waived its profits on its Greek bonds, experts say €15bn could be wiped off the country's debts.

Politicians also discussed reducing eurozone interest rates, or investigating whether national central banks could participate in a debt swap, though with a cost to taxpayers, these last two ideas are more controversial.

Officials also re-opened the tortuous private bondholder talks to see if Greece's private creditors would take a bigger than 50pc haircut on €200bn of bonds.

Meanwhile, the latest figures showed the ECB did not invest in any eurozone bonds last week, the first time its bond-buying support programme has stopped since August.

Profligate spending

As Greeks waited for a second eurozone rescue package to finally be agreed in Brussels last night, many were blaming Germany and France for encouraging and benefiting from some of the much-criticised profligate spending which reduced Greece to near bankruptcy.

About 1,000 protesters gathered in front of the Greek parliament in central Athens yesterday afternoon while riot police waited to see if there would be a fresh confrontation.

But in general, Greeks are resigned to the new package of austerity measures that will cut jobs in public service and slash pensions and the minimum wage.

While most Greeks are critical of the reforms on which the troika of the EU, International Monetary Fund and European Central Bank are insisting, many also feel that Germany and France shoulder a share of the blame for Greece's overspending in recent times.

Over much of the past decade, Greece -- which has a population of 11 million people -- has been one of the top five arms importers in the world.

Most of the vastly expensive weapons, including submarines, tanks and combat aircraft, were made in Germany, France and the US.

The arms purchases were beyond Greece's capacity to absorb, even before the financial crisis struck in 2009.

Several hundred Leopard battle tanks were bought from Germany, but there was no money to pay for ammunition for their guns.

Even in 2010, when the extent of the financial disaster was apparent, Greece bought 223 howitzers and a submarine from Germany at a cost of €403m.

In the new bailout agreement, Greece will pledge to reduce its defence spending by some €400m.


Eurozone leaders have hitherto been notably more tolerant of Greece's arms expenditure -- though this is twice the size of the Nato average as a proportion of GDP -- than it has of excessive spending on health or pensions.

Many contracts signed at the height of Greece's spending spree cannot now be cancelled because of penalty clauses and such money that is left will be spent on maintenance.

Concern that the Greek bailout agreement is inadequate overshadowed a rally on European stockmarkets that was triggered by Chinese measures to pump cash into its economy.

The Euro Stoxx 50 closed up 1.19pc, Germany's Dax rose 1.46pc and the FTSE 100 climbed 0.68pc. (© Daily Telegraph, London and Independent News Service)

Irish Independent

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