Greece edges closer to securing better bailout terms
Greece moved closer to securing better bailout terms on Monday as European finance ministers, playing down the absence of arrested IMF chief Dominique Strauss-Kahn, explored scenarios to ease Athens' debt burden.
Ministers from the 27-nation European Union indicated they could grant Greece more time to make repayments on last year’s bailout, provided Athens steps up reform measures.
They also backed the debt-laden eurozone’s third rescue package in 12 months — the 78-billion-euro ($111-billion) bailout of Portugal.
The two-day talks continuing Tuesday to contain the resurgent debt crisis were rendered tense however by the absence of the International Monetary Fund managing director, who was denied bail in New York and faces a massive jail sentence if found guilty on charges including attempted rape.
Deputy managing director Nemat Shafik was to represent the IMF, which has bankrolled the three eurozone rescues in the past year.
With speculation increasingly turning towards who might succeed Strauss-Kahn at the IMF’s helm, German Chancellor Angela Merkel insisted that should he resign, his job must remain in European hands.
Speaking in Berlin, she acknowledged that emerging economies could mount a valid claim on the post “in the medium-term,” but said that given the crisis, “in the current situation, there are good reasons to say that Europe has good candidates.”
“There is for the moment an equilibrium between the United States, with the World Bank, and Europe, at the Fund,” added Belgian Finance Minister Didier Reynders.
As well as backing Portugal’s loans, in exchange for a raft of privatisations and pressure on banks and other private investors not to pull their money out ahead of schedule, the ministers were also due to anoint Italy’s Mario Draghi as European Central Bank governor.
On spiralling Greek debts now tallied at some 330 billion euros, officials and ministers raised three possibilities — “re-profiling”, “re-scheduling” or even “re-structuring.”
The three scenarios are shades of grey, from giving Athens more time to managed default, but clearly Europe is coming round to the idea that Greece may not be able to dig itself out of trouble without further external assistance.
Analysts reckon Greece has lost a powerful friend at court in Strauss-Kahn. The United States, Canada and major emerging economies have recently questioned the volume of energy the former French finance minister has expended on Europe’s problems.
The IMF is pumping in one euro for every two put up by EU governments in the three bailouts already agreed over the past year, which also includes a 67.5-billion-euro bailout for Ireland.
The European Commission maintained Monday that restructuring of the Greek debt was “not on the cards,” warning that such a move could have “devastating consequences.”
Commission spokesman Amadeu Altafaj instead suggested “re-profiling,” understood as giving Athens more time to repay the bailout loans.
Austria’s Maria Fekter said Vienna was “favourable to extending the repayment period, that we give them more time.”
However, with EU and IMF officials due to report next month on progress in budgetary and economic reforms in Athens, she took a tougher line on handing over more hard cash.
The next 12-billion-euro installment “cannot be paid if there are no real structural reforms” set in train, she insisted.
German Finance Minister Wolfgang Schaeuble has also said Greece could be granted an extension to its repayment timescale, provided private creditors agree to match any delay.
Dutch Finance Minister Jan Kees de Jager however insisted “the only way forward now is more reforms, more budget cuts and privatisation.”
The IMF has already pushed Athens to launch a massive sale of state-owned companies to raise a massive 50 billion euros.
Surprisingly, given this was supposed to be firmly off the agenda prior to 2013, de Jager even acknowledged that ministers have discussed the possibility that holders of Greek bonds could lose some of their value.