Spring Fever

April Bailout Unlikely for Greece

Varoufakis April Bloomberg
Greek finance minister Yanis Varoufakis.
  • Why it matters

    Why it matters

    If Greece fails to secure more bailout funds this month it could end up defaulting on its debt, and exiting the euro zone. Yet, donors complain that the country is dragging its heels on agreeing to reforms that would unlock the loans.

  • Facts

    Facts

    • The euro zone finance ministers are to meet on April 24 in Riga.
    • European Commissioner for the euro currency, Valdis Dombrovskis, says that the meeting will likely only discuss progress.
    • Greece is still waiting to receive the remaining €7.2 billion from its bailout program.
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    Audio

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The Greek government is increasingly antagonizing its international donors, even as it runs out of money and time.

That means that the latest deadline of April 24 could pass without the release of a vital tranche of funding for the anti-austerity government in Athens. That could increase the risk of a debt default and euro zone exit.

Greece’s lenders — the European Union, the European Central Bank and the International Monetary Fund — are still waiting for the leftist Greek government to agree to necessary social and economic reforms in return for the outstanding €7.2 billion of its bailout funding.

“We expect a credible commitment to reform from Greece. Time is of the essence,” European Commissioner for the euro currency, Valdis Dombrovskis, told Handelsblatt.

Behind the scenes, individuals involved in the negotiations are more direct. “There is no movement whatsoever,” said one E.U. diplomat, adding that the Greeks have not even managed to provide reliable figures on the costs of their economic and social policy. As a result, the diplomat explained, the necessary technical basis for negotiation is missing.

Because of these deficiencies, Athens can hardly expect to see any financial aid from Brussels in April.

The new Greek government, headed by radical-left Syriza party, which came to power in January after campaigning to end austerity, has failed to secure debt relief from its lenders and the country is rapidly running out of the funds required to stay afloat.

Athens had been given a deadline of April 20 to complete its lists of proposed reforms, but it looks like yet another deadline in the Greek crisis is to pass without any resolution.

The next meeting, on April 24 in Riga, of the group of euro zone finance ministers, known as the eurogroup, would only “be an assessment of the status of progress” in the negotiations with Greece, Mr. Dombrovskis told Handelsblatt.

“We expect a credible commitment to reform from Greece. Time is of the essence.”

Valdis Dombrovskis, European Commissioner

As things now stand there would be hardly any progress to report. Greek Finance Minister Yanis Varoufakis has made no commitments on the subject of privatization, or pension and labor market reforms, said officials in Brussels.

But from the standpoint of the euro zone, these issues are indispensible conditions for the disbursement to Athens of the remaining sum of €7.2 billion from Greece’s €240 billion bailout program. As a result the deadlines are shifting once again. In Brussels, the eurogroup meeting on May 11 is now being mentioned as the next possible deadline.

The German government confirmed on Wednesday that it was unrealistic to expect the euro zone to be able to pay the tranche this month.

“We are negotiating with Greece at the moment. If there is a reform list, then the next step is a so-called Staff Level Agreement to make formal changes to the conditions of the aid programme. This is a complex process and no one in the eurogroup expects this to be concluded by April 24,” a finance ministry spokeswoman told Reuters news agency.

The International Monetary Fund is also increasingly irritated over Greece’s behavior. Mr. Varoufakis will come under enormous pressure at the IMF spring meeting in Washington, which begins on Friday. The euro zone and Greece will likely be at the top of the agenda once again. According to government officials, the Americans and the Chinese are most likely to be asking questions at the gathering. The Greek finance ministry has said that Mr. Varoufakis will meet with President Barack Obama on Thursday and with ECB president, Mario Draghi, on Friday, while in Washington.

 

Greece Greek gov debt in percent and in billion of euro-01

 

One reason for the discontent is Athens’ suggestion that it may not be able pay its debts to the IMF on time. So far, however, this has been nothing but an empty threat. Greece paid €450 million ($485 million) to the IMF last week.

However, in the first two weeks of May alone, Greece has to repay the IMF almost €1 billion.

The Greeks have sought to dispel concerns that they might be planning to default on their debt, after a report in the British newspaper, the Financial Times, said that the Athens government was preparing to do just that if it did not gain access to any more bailout cash.

“Greece…is not preparing for any debt default and the same goes for its lenders,” the office of the prime minister, Alexis Tsipras, said in a statement. “Negotiations are proceeding swiftly towards a mutually beneficial solution.”

 

Ruth Berschens heads Handelsblatt’s Berlin bureau, Jan Hildebrand covers politics from Berlin, Siobhán Dowling is an editor with Handelsblatt Global Edition. To contact the authors: berschens@handelsblatt.com, hildebrand@handelsblatt.com, dowling@handelsblatt.com

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