Greek Bailout

As Athens Awaits, Germany Delays

Somebody has to end it. Source: DPA
The spelling may be wrong, but the sentiment is strong.
  • Why it matters

    Why it matters

    German opposition could torpedo any speedy agreement on a third Greek bailout package worth €86 billion, or $93.5 billion.

  • Facts

    Facts

    • The first tranche is meant to flow before August 20, when Greece has to pay back €3.2 billion to the European Central Bank.
    • The European Commission fears any delay could raise the risk of new elections in Greece.
    • The ECB wants a deal in order to speed the recapitalization of Greek banks.
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    Audio

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The German government fears that a new bailout for Greece cannot be negotiated properly under current time constraints.

“To agree to just a quarter of the reform requirements and postpone the rest until fall isn’t enough,” a government source told Handelsblatt.

The official said that it would be impossible to present a half-baked deal to the Bundestag, Germany’s lower house of parliament. Instead, Berlin backs taking an extra two or three weeks for the negotiations, even if Greece requires an emergency loan from the European Financial Stabilization Mechanism (EFSM).

Representatives from the European Union, European Central Bank, International Monetary Fund and the European Stability Mechanism have been haggling with officials in Athens about the conditions for a third rescue package worth up to €86 billion, or $93.5 billion. The first tranche is meant to flow before August 20, when Greece has to pay back the ECB €3.2 billion.

The European Commission is pushing for a quick resolution to the negotiations, fearing a delay could risk new elections in Greece.

The ECB also wants a deal in order to speed the recapitalization of Greek banks. The IMF is holding back at the moment, as it wants to wait until fall before it decides to take part in the new bailout.

After vacillating for half a year, Greek Prime Minister Alexis Tsipras is also now pushing for a deal. “We’re at the finish line,” said Mr. Tsipras shortly after returning from a four-day vacation. He’s in a hurry because of the August 20 deadline, but also because a deal could end unrest within his leftist Syriza party.

“The Greeks are finally getting down to it.”

E.U. diplomat

The German government source said a quick deal at any price was not the best foundation for a “high-quality third program.”

Berlin’s foot-dragging has riled officials in Brussels.

“I’m not aware of anyone else there with a better overview than we have,” said a Commission spokeswoman.

She said the government in Athens had made true headway in recent days: “Our teams have been there for almost two weeks and they’re reporting acceptable progress.”

A source from E.U. diplomatic circles confirmed that assessment: “The Greeks are finally getting down to it.” Though there remained “a large amount of open questions,” from the government’s privatization plans to its time plan to implement reforms.

Under E.U. supervision, Greece is supposed to make privatizations worth €50 billion over the next three decades. But many observers consider that far too optimistic.

Market conditions for selling state property are extremely poor right now.

“Real estate prices have plummeted 30 to 40 percent since the crisis started,” said the broker Petros Karagiannis. “Nobody can reliably say if buyers can even be found for state property and what they’d be prepared to pay.”

Greek fiscal policy also needed to be discussed, as the country’s economic prospects for the rest of this year and next year will determine its financial framework.

Greek government sources want to hammer out a deal by this weekend, but its international lenders are less optimistic. The creditors only expect to determine this weekend whether a pay-out of the first aid tranche by August 20 is realistic.

If E.U., ECB, IMF and ESM officials manage to work out a third bailout with Greece next week, euro zone finance ministers could then discuss the deal next Friday, allowing the German parliament to vote on it in a special session by August 17 or 18. The euro zone finance ministers could then release the first ESM payment to Greece on Aug. 19.

But the German government does not consider that realistic. “It would be better to negotiate another two or three weeks and have a proper program instead,” said a German finance ministry official.

Germany fears the European Commission’s eagerness to forge a deal with Greece could cause it to make too many concessions.

Should an agreement not be possible by August 20, Greece would need another loan from the EFSM. Athens already received €7 billion from the fund in July and the European Union changed the EFSM’s criteria this week so non-euro zone countries like Britain will not be responsible for further loans to Athens.

 

Jan Hildebrand and Gerd Höhler are correspondents in Berlin and Athens. To contact them: hildebrand@handelsblatt.com and hoehler@handelsblatt.com

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