Athens.- Eurozone finance ministers held a teleconference on Saturday to discuss strategies for making Greek debt sustainable ahead of a new meeting in Brussels on Monday, when they will be under pressure to come up with a definitive solution.
There was no immediate statement after the teleconference, which was part of the continuing discussions that took place over the weekend, including further technical work from the Euro Working Group, aimed at striking a formula that is likely to reduce Greek debt from a projected 189 percent of GDP next year to 124 percent in 2020.
The main obstacle to clearing the loans for Greece is a plan to reduce the interest rates charged by euro-area creditors. A cut in interest rates would put them below the cost of funding for some of the 17 euro-area countries, the official told reporters in Brussels.
Greek Finance Ministry sources have suggested that talks between eurozone finance ministers during a teleconference on Saturday went smoothly and a number of technical issues were discussed before the Eurogroup convenes in Brussels on Monday.
Finance Ministry sources in Athens denied there was any disagreements between ministers and insisted that discussions were on track for Monday’s meeting.
“God forbid that we should not be close to an agreement for Monday,” a senior Finance Ministry source said, according to Skai TV.
Some reports said that sources in Brussels suggested that a final decision might not be reached and that finance ministers might have to postpone an agreement until a regular Eurogroup meeting on December 3.
Prime Minister Antonis Samaras returned to Athens on Saturday from the European Union leaders’ summit in Brussels, where the 27 politicians discussed the EU budget. Samaras used the opportunity to speak in person to 12 of his counterparts, including German Chancellor Angela Merkel, French President Francois Hollande and Italian Premier Mario Monti. Sources said Samaras attempted to stress to fellow leaders the economic difficulties faced by Greece, describing the “post-Hiroshima” fallout of the crisis.
Eurozone finance ministers failed to reach a conclusive agreement on how to deal with Greek debt on Tuesday and are to hold their third meeting in two weeks in Brussels this Monday. The solutions that are likely to be on the table are lending Greece money to buy back its bonds at a reduced rate on the secondary market, the European Central Bank returning the profits it made on Greek bonds and Greece’s partners reducing the interest rate on their bilateral loans to Athens.
Kathimerini understands that German Finance Minister Wolfgang Schaeuble had been in a position during last week’s Eurogroup to advocate a drastic reduction in the interest rates on bilateral loans to Greece, as well as the extension of their maturities, to help make Greek debt sustainable. But he ended up adopting a more conservative position after the German government’s coalition partners, the CSU and FDP, advised Chancellor Merkel that such an initiative would not have their support and would not pass through the German parliament.
Beyond domestic politics, one factor that could complicate any deal is that the International Monetary Fund seems to be advocating that any bond buyback scheme should happen immediately, possibly even before December 14, when T-bills worth 3.4 billion euros are due to mature. This would mean a fresh delay for Greece’s loan tranche, which would be held up until the buyback, has been completed.
Greece is hoping to receive the whole 44 billion euros due to be released from the bailout program next month. As things stand, all of this money will go to cover immediate obligations. Some 24 billion euros will be used to complete the bank recapitalization program, 9 billion will be invested in the buyback scheme, 4.5 billion is needed to cover the primary deficit, 3.5 billion has been slated to reduce state arrears, 3.4 billion is needed to cover four-week T-bills that mature next month and 500 million euros will go toward covering a bond that matures on December 21.
Alternate Finance Minister Christos Staikouras calls for a “clean and effective solution” to the Greek debt problem, in an interview with RealNews newspaper appearing the paper’s Sunday edition, adding that only this way will the solution also be convincing.
He also expresses hope that German chancellor Angela Merkel will finally take a “macro and micro approach” to the issue, noting that he expects Monday’s Eurogroup meeting to give answers to the problem of the outstanding tranche of the EU/IMF bailout loan to Greece, since “the lenders have no alibi after the consistent stance of the cooperation government”.
Reporting on the results of the summit at a press conference, Samaras noted that EU leaders had come closer in their respective positions but in the end failed to agree.
Concerning the amount of cohesion funds for Greece, which were projected to amount to 11.2 billion euros, Samaras said the Greek side had fought for a special clause. He also announced that European Council President Herman van Rompuy had proposed raising this amount by 20 percent.
The EU budget for 2007-2013 called for a 40 percent reduction in funds to Greece, Samaras said, because of the overall budget decreases for EU countries for 2014-2020 and because the expansion of the EU to eastern European countries meant there were more claimants to the funds.
One of the problems was also that each country’s funding totals were based on 2007-2009 figures, before the crisis and recession hit Greece.
“The battle is continuing and we are striving to get more funds,” Samaras added, noting that he was cooperating with other countries that had shared interests in terms of the EU budget.
German chancellor candidate Peer Steinbrueck warned in a newspaper interview released on Saturday that German taxpayers could get stuck with a large bill if Greece were to default on its loans.
Steinbrueck told Bild am Sonntag newspaper that Germany has so far only provided loan guarantees for Greece but that could end up costing German taxpayers billions of euros. He said the government should make that fact clear to the public at home.
“One must tell the people that Greece could default on these loans,” said Steinbrueck, who will lead the centre-left Social Democrats (SPD) candidate against Chancellor Angela Merkel in next September’s federal election.
“We in Germany have to make sacrifices to help hold Europe together. We’re already part of a ‘liability union’,” he added.
Many Germans, especially conservatives who support Merkel’s Christian Democrats (CDU), are firmly opposed to any sort of collectivised debt in Europe and especially the creation of euro zone bonds.
Steinbrueck said “so far Germany has not paid a single cent” to Greece but added it was quite possible that could change.
“We were ready to pay money for the costs of German reunification – something all of our neighbours welcomed despite the bad experiences they had had with us,” he said, referring to Germany’s Nazi past. “Now is time that we have to ask ourselves the question: what is Europe worth to us?”
Steinbrueck said that Greece will not be able to return to the capital markets for another eight years.
“We’re going to have to build a bridge for this period and that’s going to cost money,” Steinbrueck said.