Monday, 19 November 2012

Greece Awaits Payout Decision

Greece awaits an important decision from tomorrow’s Eurogroup meeting in Brussels: the nod on 43 billion euro in delayed loan instalments, which Greece is now eligible for after passing 13.5 billion euros’ worth of spending cuts earlier this month. 

“We are completely ready for Tuesday. There is no further action pending on our side,” said Finance Minister Yannis Stournaras on Sunday evening.

He said the government had moved to put into law a mechanism that will oversee budget execution in each ministry to ensure that there are no cost overruns. At a Eurogroup meeting last Monday the Eurogroup said it expected that this week “the necessary elements will be in place for Member States to launch the relevant national procedures required for the approval of the next EFSF disbursement.”

The fragile, three-party coalition in Athens needs the loan payouts to recapitalise banks and to pay off state suppliers, pumping money back into the economy.

The decision to release the money was meant to have been taken at last Monday’s Eurogroup meeting. But that meeting was dominated by a dispute with the International Monetary Fund, which believes that Greece’s debt is not sustainable unless a large chunk of it is forgiven. Since banks and private sector lenders already forgave 107 billion euros last march, representing more than half of their Greek bond holdings, it is now incumbent on European governments to offer a discount, something the eurozone has been resisting.

Greece has taken a surprisingly soft stance on the restructuring of its debt. The IMF's insistence on official sector involvement was not grasped by the Greek side. Asked about it on Friday, Finance Minister Yannis Stournaras said "I don't have anything to say about that, thank you."

Reuters quotes ECB board member Joerg Asmussen as saying that the Eurogroup will not address the sustainability issue on Tuesday, leaving it to later meetings.

Europe is also consumed by larger concerns, namely a dispute between net contributors and net beneficiaries over the size of the next seven-year European budget. Fiscal hawks like Germany and the Netherlands want the roughly one trillion euro budget cut significantly. An emergency EU summit has been called for Thursday to resolve the dispute.

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