By Angelika Papamiltiadou (Market News International)
August 9 2012
Athens (MNI) – A growing number of Eurozone countries, led by Germany, are reluctant to release the first two loan tranches of the second bailout package to Greece, as they doubt about Athens’ commitment
to reform, according to senior Eurozone officials.
The International Monetary Fund is also sceptical, fearing that the baseline scenario of the bailout is no longer realistic and that another debt restructuring may be inevitable, the top-ranking officials told MNI.
The two big tranches of E31.5 billion each are “a point of worry for the majority of the Eurogroup finance ministers, not just the hardliners,” one source said.
“We are talking about over E60 billion to be given in a period of a few months,” he explained. “The majority of the Eurozone members are uncomfortable because of the complete derailment of the Greek program,
the political instability, and the fact that we really don’t believe in the commitments anymore.”
The decision on the first tranche could be delayed until October after the inspectors of the troika – the European Commission, the ECB and the IMF – submit their report on compliance with demanded reforms, a second senior Eurozone official said.
“It’s a logical conclusion, given the fact that the troika inspectors will return to Athens at the end of August and could stay there for weeks,” he said. “It will all depend on how soon the troika inspectors can draft a preliminary report and whether the Eurogroup is convinced to step in and release a tranche.”
In the meantime, an intermediate decision could be taken by the Eurogroup in the first week of September in an extraordinary meeting, the first source said.
“We have been notified that the Greek state will run out of cash by the end of August,” he said. “This issue must be addressed at the Eurogroup level. One option is a bridge loan. But I believe that most likely the delayed tranche of June for E4.2 billion could be released, if the Troika gives the green light.”
As Greece sinks deeper and deeper into recession, Athens is ever more dependent on liquidity life-supports. The GDP contraction this year could amount to as much a 7%, according to some estimates.
Among the hardliners, Germany is worried that delivering the planned loan tranches would only ease the pressure for structural reforms.
“Germany thinks that billions of euros have been spent with no tangible results and will not commit to anything before seeing the full troika report and before the September 12 court ruling” on the future
bailout fund ESM, the first source said. “The matter is political now.”
As MNI reported last month, one of Germany’s working scenarios for Greece is another debt haircut and an orderly default, as foreseen in the ESM.
The hardline Eurozone countries will “not be satisfied with a letter of intent from the new Greek government, nor with the confirmation of the new set of fiscal measures from the parliament,” the source said.
“The amount to be given in the two tranches is so huge that we would like to see concrete results first, and that would take us to December, when we will have the first real evaluation of the troika after the measures have been put into effect,” he said.
“It is down to politics really,” he explained. “Greece is not being judged on its own merits now but as part of political and financial developments in the Eurozone. It simply isn’t a good time for Greece right now.”
The scepticism at the IMF is even greater. “There is a difference of opinion between the European section of the Troika and the IMF officials. It is highly likely that we will have two conflicting reports in September,” the official said.
“According to the IMF inspectors who left Athens a few days ago, the recession in Greece could continue well into 2015, even with a two-year extension of the fiscal adjustment period,” the first source said.
“In the IMF’s opinion and based on the above findings, Greece’s debt could not reach the desired target of 120% of GDP in 2020,” he said. “Don’t forget this is a prerequisite of the board of directors of the IMF to keep funding Greece.”
“The IMF thinks that based on the bigger than expected recession, Greece will not be able to achieve primary surpluses any time soon,” he continued. “Therefore, the second bailout program and its terms are
outdated.”
“I would expect that in September the IMF will step up the pressure for another Greek debt restructuring,” he added.
As a senior EU official told MNI last month, the restructuring could happen “either by prolonging the loan maturity and cutting of interest rates or by a haircut with the participation of the private and official sectors.” Otherwise, he said, the IMF could stop funding Greece.
But it appears that the European section of the Troika disagrees. The ECB and the Commission “are ready to draft a report which works around the fact that many Eurozone governments are opposing additional funding to Greece,” the second source said.
“It seems that [the ECB and the Commission] believe that if Greece is given a two-year extension period for fiscal adjustment, recession will ease and Greece could return to primary surpluses soon,” he explained. “They seem to believe that Greece could post growth in 2014 and would need only minor additional funding that could be approved by the Eurozone governments.”
“But we all know that this is another European way of postponing the problem for later,” the first source commented.
No comments:
Post a Comment