sábado, 11 de fevereiro de 2017
3 ‘Grexit’ battlelines emerge
3 ‘Grexit’ battlelines emerge
As Europe’s crucial election season nears, EU creditors are racing to prevent a renewed Greek debt crisis.
By BJARKE SMITH-MEYER 2/10/17, 3:39 PM CET Updated 2/10/17, 9:15 PM CET
Here’s exactly what the eurozone’s finance ministers wanted to avoid: another Greek drama.
And yet 10 days ahead of the next Eurogroup meeting, officials are scrambling to agree with Athens on the latest round of reform commitments as part of Greece’s €86 billion bailout program.
The February 20 meeting of the eurozone finance ministers is the last time the 19 countries meet before crucial elections kick off across the bloc. As anti-euro populism spreads in the Netherlands, France, and Germany, the last thing politicians fighting for votes in these countries want is a rerun of a tiresome Greek play generating headlines. This month’s gathering, said a senior EU official, is “not formally but realistically the time one needs to reach political agreement.”
Greek and EU officials are still in the process of negotiating the terms and conditions which Athens must respect to secure the next bundle of bailout cash.
The ultimate goal of the bailout package is to bring Greece back to the capital markets by mid-2018, so that the country can sell its public debt to investors.
So far, Greece has managed to agree on reform promises, which include strengthening its banking governance and changes to its pension system.
But the current round of talks has been slow, as disagreements persist over Greece’s desire to reintroduce collective bargaining into its labor markets and the privatization of its energy sector, among other things. While there are technically no deadlines to meet, the talks are constrained by Greece’s dwindling coffers.
The biggest elephant in the room is the International Monetary Fund.
The Fund has repeatedly threatened to walk away from the current bailout package, unless Greece gets more debt relief. Otherwise, Greece won’t be able to grow out of its mountain of debt, the IMF believes. The country’s EU creditors disagree, and are standing firm.
The IMF’s participation is particularly important for the likes of Germany and the Netherlands. Without it, the countries’ parliaments may not agree to further disbursements of bailout cash.
How will the latest sequel to the Greek crisis end? The script isn’t complete, but here are the already-aired conflicts that have emerged and must be resolved to get a happy ending:
1. IMF vs the ESM
This week witnessed an unusual public row between the IMF and the head of the EU’s bailout-arm, known as the European Stability Mechanism (ESM).
Klaus Regling called the IMF’s damning audit of Greece’s debt burden — “highly unsustainable,” in the Fund’s words — “not appropriate” in an op-ed in the Financial Times.
He contended that the IMF got its analysis wrong, as it doesn’t take the ESM’s very long-term loans and low interest rates into consideration. The IMF also “ignores the pledge made by Greece’s eurozone partners” for additional debt relief, “should there be a need for it,” the ESM chief wrote.
But the Fund has stuck to its guns, with its head Christine Lagarde characterizing her organization as playing the role of the “ruthless truth-teller” with its report on the state of the Greek economy.
A particular sticking point for the IMF is the EU creditors’ budget surplus target of 3.5 percent of Greece’s economic output by 2018, which the Fund says is too ambitious. In turn, however, the IMF wants Athens to make further cuts to pension handouts once the program is over. Alas, this is something the Greeks are dead set against.
2. Greeks vs the IMF
As if the fight between the IMF and the ESM wasn’t enough, the embattled Greeks have also come out swinging.
On Thursday, the new Greek alternate foreign minister for EU affairs, George Katrougalos, launched a stinging attack against the IMF over its “irresponsible demands,” including “insistence to open issues that were closed … like the pension review.” He went on to argue that Greece would have “already reached an agreement with our EU partners in December, had it not been for the IMF.”
For now, the eurozone countries are putting up a united front against the IMF’s position and are seeking a compromise deal to move the talks forward.
To achieve that, Greece’s Finance Minister Euclid Tsakalotos is expected to meet with EU creditors and Eurogroup President Jeroen Dijsselbloem on Friday to talk about measures that would serve as a back-up, in case Greece is unable to maintain its budget surplus target of 3.5 percent after 2018.
3. Europe vs ‘Grexit’?
An agreement between the parties would open the door for EU officials to travel to Athens next week to conclude the latest round of bailout talks.
If that happens, there’s a chance that the details can be agreed by February 20 and sanctioned by the Dutch parliament, ahead of the country’s March elections. The IMF may then also finally decide to participate.
But if no deal is reached before the Eurogroup meeting, then talks will drag on even as Greece will begin facing debt payments, an EU source said. In April, Athens must pay back €1.4 billion to the European Central Bank.
Katrougalos refused to confirm that his country was running out of cash, insisting that “we can survive without an agreement [in February].”
That might be the case for the spring. But an official close to the talks has said maturing government debt and interest payments by July will cost the Hellenic government more than €13 billion.
EU officials involved in the negotiations insisted that talks are going well. But no one is ready to say it’s a done deal.
In any case, how the current Greek debt episode will end will become clearer next week. Until then, the only thing certain is that time is running out.