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Eurozone finance ministers gathered Monday to decide whether to unlock billions of euros in fresh aid for Greece just after creditors signalled support for its reforms in a long-awaited audit.
The eurogroup ministers, holding their last meeting before the summer break which was also attended by IMF chief Christine Lagarde, were to decide if Greece has done enough to obtain some 8.1 billion euros ($10.4 billion) in fresh aid.
They will also deal with the political crisis in Portugal, which has raised fears of fresh pressure on the 17-nation single currency bloc.
Just hours before, Greece’s creditors — the European Union, the European Central Bank and the International Monetary Fund — had said that the Greece audit had been concluded with a “staff-level agreement” from both sides.
They said that the outlook “remains broadly in line” with a pledged reform programme.
Going into the meeting, German Finance Minister Wolfgang Schaeuble sounded cautiously optimistic.
“I am confident that we’ll take a step forward today. And that we won’t see any dramatic escalations in Greece in the coming months,” he said.
But he warned: “The road will remain a difficult one for Greece. You have to have respect for what Greece has achieved so far, but know that not all problems have been solved.”
Asked whether he expected the Eurogroup to release the funds, Schaeuble replied: “We’ll examine the Troika report very carefully. We’ve never made light of such decisions. We’re always very meticulous, so that we know that we can stand by our decision.”
His French counterpart Pierre Moscovici said that, depending on the Troika’s report, he would argue for a deal to be reached to release the money “by the end of the month.”
The term Troika refers to the IMF, EU and ECB as creditors.
Greece needs to redeem bonds worth 6.6 billion euros by mid-August, and of the reported 8.1 billion euros of fresh aid to Greece, 6.3 billion euros are to be put up by the Europeans, the remainder by the IMF.
There has been much discussion whether Greece should receive the aid in a single lump sum or in a number of smaller instalments.
Heading into the meeting, Eurogoup chief Jeroen Dijsselbloem told reporters that “we will see if an instalment can be made soon and what the size of it will be.”
— Focus also on crisis in Portugal —
Eurogroup ministers are also due to discuss the situation in another bailed-out country — Portugal, which sunk into a political crisis over the shock resignations of two key ministers this month.
European leaders, including Eurogroup chief and Dutch finance minister Dijsselbloem, have asked Lisbon to clarify the political situation quickly, fearing that uncertainty could throw the country off its course to exit the troika’s rescue programme by 2014.
German finance minister Schaeuble conceded that “there are occasionally government crises” in EU member states.
But Portugal appeared to have overcome its crisis already, Schaueble said.
“In recent years, Portugal has shown itself to have very stable conditions.
“There is every indication that they’ve overcome” the crisis. And on the matter of the reforms, “Portugal is on a very successful path,” the German minister said.
“I feel fairly relaxed that Portugal will continue along its successful path.”
Portugal’s doggedness in implementing required reforms has won praise from the international creditors but the painful austerity measures have been immensely unpopular at home.
Disagreements over the reforms sparked the latest crisis, with foreign minister Paulo Portas resigning because he disagreed with Prime Minister Pedro Passos Coelho’s decision to hold fast to the path of austerity.
After a series of negotiations with Portas, Passos Coelho announced a deal this weekend to keep the shaky coalition together.
Under the accord, Portas would remain with a bigger role as deputy prime minister, tasked in particular with coordinating the country’s economic policies as well as relations with the country’s international creditors.
On Tuesday, the finance ministers from all 28 European Union countries are expected to give the final green light to Latvia to join the eurozone.
They would also have to set an exchange rate between the Latvian lats and the euro.