Greek loan delayed on signs more aid needed

The euro zone powers played hardball again with Greece, delaying the release of critical rescue loans as a new report said the country might need another €32.6 billion in aid if its deficit targets are relaxed.

In spite of two parliamentary votes to back a new €13.6 billion austerity drive, euro zone finance ministers suggested they might meet again this week before sending €31 billion in promised loans to Athens.

“In Europe, decisions are always made when the knife is, so to speak, at our throats, when the abyss is near,” Belgian minister Steven Vanackere told reporters as the talks began last night.

Amid warnings from the Greek government that it is running out of the cash, the agreed €31 billion tranche is required to enable Greece refinance debt and recapitalise its crippled banking system.

However, powerful donor countries such as Germany are reluctant to proceed without clarity over the outlook for the Greek national debt.

“There won’t be any definitive decisions today, but I think the general feeling is that we would like the next disbursement to be done in the most efficient way possible,” said Jean-Claude Juncker, leader of the ministers and prime minister of Luxembourg.

Another €32.6bn?

Although a new update on the second Greek bailout from the European Commission-International Monetary Fund-European Central Bank troika suggests almost €33 billion will have to be added to the loan to make up for a two-year relaxation of its deficit targets, the report did not include a long-awaited debt-sustainability analysis.

This includes €15 billion in 2014 and a further €17.6 billion in 2015 and 2016, money the euro-zone powers are reluctant to grant to Greece.

“I’d like to see if Greece has fulfilled all its obligations and then I’d like to hear the troika report because it depends on the Greek government having found a solution with the troika, and I haven’t read anything on that on the wires,” said German minister Wolfgang Schäuble. The lack of a debt sustainability analysis is crucial, given disagreements between troika members over the likely evolution of the Greek national debt.

Overshooting target

However, ECB executive board member Jörg Asmussen said over the weekend that the current rescue programme for Greece will see it overshoot its target debt level of 120 per cent of national output by 2020 to reach 140 per cent of gross domestic product. The hardliners in the euro group of ministers did not waver from their customary scepticism.

“We know that Greece has asked for a bit more time, but more time means more money. That’s an issue because where should that money come from?” said Austrian minister Maria Fekter. “I can’t imagine that the other states, the ministers, want to go back to their taxpayers and that we will have to decide on new packages for Greece that cost even more in our parliaments. We have to be more creative.

“The Austrian taxpayers are also shaking their heads about why we need extra money for Greece every three months.”

Others were more conciliatory. Mr Vanackere said the decisions taken by Greek MPs could not be without effect. “We have to find a solution together with the Greeks, which is much better for the whole euro zone than all those ugly scenarios which have been doing the rounds in the past months and which don’t offer a sustainable solution for the euro zone,” he said.

French minister Pierre Moscovici said a deal to put the Greek plan back on track was both desirable and possible.

“I have come here with the idea of helping to reach this political agreement so we can make substantial progress tonight to get us out of this situation,” he said. “Since the Greeks have made considerable efforts which we asked of them, we now have to make good on our responsibilities.”

€31bn

amount due to Greece in next disbursement from its agreed bailout programme

€32.6bn

amount of extra money the EU-IMF-ECB troika says Greece will need if its deficit targets are eased

€5bn

amount of money Greece needs this Friday to redeem short-term debt