Friday 23 February 2018

Greece asks for new bailout on eve of IMF loan default

Funds would be used to repay debt with VAT and pension reforms promised - but little detail provided

Greek Prime Minister Alexis Tsipras
Greek Prime Minister Alexis Tsipras
A man searches the contents of a public trash bin on a street in Thessaloniki, Greece
Pro-Euro protesters attend a rally in front of the parliament building, in Athens, yesterday
Pensioners discuss politics while waiting at a national bank’s ATM to withdraw some money in the Greek capital Athens yesterday

Donal O'Donovan and Caroline Crawford

Greece requested a fresh bailout last night, as the country defaulted on its IMF loans.

A single page request for what is thought to be a new €30bn bailout was tabled last night on a telephone conference call with euro area finance ministers, including Michael Noonan and his German counterpart Wolfgang Schauble.

The money would be used solely to refinance existing Greek debts - essentially rolling over elements of the battered country's massive debt pile.

The Greek side is believed to have offered some concessions on VAT and pension reform, but little or no detail beyond that the money will not be used to fund government spending.

Greek finance minister Yanis Varoufakis is understood to have made the request for a new rescue to be provided by the European Stability Mechanism (ESM), with no IMF involvement.

"The loan will be used exclusively to meet the debt service payments of Greece's external and internal debt obligations", a letter from Athens to eurozone finance ministers said.

Ministers from the other 18 euro members, including Ireland, agreed to consider a more detailed proposals which will be circulated in the coming 24 to 48 hours. It is the strongest sign yet that talks between what are now two sides - Greece on the one hand and the rest of the euro group - are still ongoing.

But any chance of securing the extension that Greece had been seeking for its second bailout passed last night when it failed to make a €1.6bn payment to the IMF.

Greece is now in default on its debts to what is normally a country's "lender of last resort".

The IMF will not lend to Greece again while it is in default.

The ESM was set up at the height of the euro crisis with a capacity to lend as much as €500bn as a so called "firewall" against market contagion. It is already owed €130bn under the second Greek bailout, in 2012, which expired yesterday having been extended twice.

Ireland has long eyed the ESM - which unlike the IMF can lend over long periods at low rates - as the potential source of funds to recover some of the €64bn cost of bailing out our banks, but with no success.

A spokesman for the Department of Finance last night declined to comment on the discussions.

Eurozone finance ministers are due to hold another meeting to continue talks today.

But the prospect of agreeing a new deal was immediately dismissed by a number of European leaders who have been angered by the Greek government's call to hold a referendum.

German Chancellor Angela Merkel told parliamentarians that Berlin would not get back to the negotiating table until after the referendum.

And her coalition partner and Socialist deputy, Sigmar Gabriel, said Athens must first "kill" its plebiscite if it wanted to resume talks.

Greek Prime Minister Alexis Tsipras, who is campaigning for a No vote to the existing terms, is unlikely to back down under the pressure.

"From the first moment, we made clear that the decision to hold a referendum is not the end but the continuation of negotiations for better terms for the Greek people," a Greek government statement said.

"The Greek government will, until the end, seek a viable agreement within the euro."

The last country to request an ESM bail-out was Cyprus in 2013, which received a €9bn rescue during its banking crisis.

Leaders from across the continent continued to call on Mr Tsipras to make a stark choice to remain a member of the single currency and sign up to austerity conditions, or choose the path of the drachma.

Today marks the first day the country will spend out of the bail-out programme since its first financial rescue at the height of its debt crisis in 2010.

Without an extension, Greece is all but bankrupt and will struggle to make payments to its public sector workers and pensioners.

All eyes now turn to the European Central Bank which has threatened to cut off the €88bn in emergency funds it has used to prop up the banking system.

If the ECB decide to pull the plug, Greek banks will not be able to open after their mandatory bank holiday next week.

Irish Independent

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