The future of Greece in the hands of the Eurogroup
February 20, 2012 – 2:30 amFinance ministers from the euro zone must give the green light today to the payment of a loan of 130 billion euros to Greece to avoid going bankrupt. The Temple of Zeus in Athens.
The partners of Greece in the euro area, which meet Monday, should agree on a solution to prevent the country from going bankrupt in a month, even if the terms of the proposed aid is not yet clearly defined. Several European leaders have shown their confidence in recent days in the ability to unlock the situation Monday during a meeting of finance ministers of Monetary Union in Brussels.
Following a telephone conversation Friday, German Chancellor Angela Merkel, Italian Prime Mario Monti and Prime Minister of Greece Lucas Papademos have expressed "confident that an agreement on Greece can be reached Monday the Eurogroup ". "We're getting closer to have a solid basis for a decision Monday," said the spokesman for the German Finance Minister Wolfgang Schäuble, although it had multiplied the signs of mistrust vis-à-vis of Athens recently. French President Nicolas Sarkozy has also "expressed confidence that an agreement on a new Greek program is concluded in the next few days, paving the way for a substantial reduction of the Greek debt".
Aid on the table has two interrelated components: a deletion with the private creditors of Athens 100 billion euros of Greek debt, and a new bailout of 130 billion euros from its creditors. The whole question now is what the scope of the agreement that should come out of Monday's meeting. The green light to partial erasure of private debt, already largely complete, seems on track, and can not wait any more: it is not put back on track in the next few days, it will not be concluded before the deadline of March 20, date-cleaver which Greece will have to repay 14.5 billion euros of debt, otherwise it will default on payment.
The IMF could lend 13 billion
This is the part of public support that the uncertainties are the most numerous. Good news came from Washington Sunday: Treasury Secretary Timothy Geithner said the United States would support the idea of a new International Monetary Fund loan in Athens. "This is a very strong and very difficult to reform, deserving the support of the international community and the IMF. The United States encourage the IMF to support this agreement," he wrote. The IMF would consider contributing a loan of 13 billion euros in new bailout, the Wall Street Journal. According to the website of JDD, the Fund proposes that the public debt of Greece in 2020 significantly exceed the level he wants to see it go down, reaching 129% of GDP when he wants it to be 120% up to that date.
On European aid to the President of the Eurogroup Jean-Claude Juncker, it would be "wise, judicious and advisable that finds consensus on the contours" of the program Monday. Some within the euro area are in favor of splitting the envelope, by not releasing a small portion of the aid at first, and await the outcome of Greek elections and the commitments of the new government before continuing payments or not. Paris prefers that the agreement covers all of the help, knowing that the different tranches will be disbursed in any case in light of reforms made by Athens. For the euro area has increased the requirements in exchange for his support, so that Greece can be found virtually under the tutelage of its partners.
The debt of Greece will not be reduced to 120% in 2020
Thus, a whole list of reforms contained in the "Memorandum" agreed with its creditors should be launched prior to the payment of a first tranche of aid, so they must be passed by late February or early March. And the euro area is also finalizing the creation, claimed by France and Germany, an escrow account which will be paid a portion of the funds loaned to Greece so that they are primarily used to repay public debt. This measure, which seems to have been accepted by Athens, has a number of technical difficulties and we must decide how such monitoring mechanism.
This is what's the job of senior officials of the Treasury 17, meeting in Brussels on Sunday. The other remaining issue to be arbitrated on the actual amount of public support: according to one diplomatic source, needs up to 5.5 billion more have already been identified, because the situation in Greece has deteriorated since October, when the sum of EUR 130 billion was set. And it will probably go even further, because at this stage, the measures are far from capable of reducing the public debt ratio of Greece to 120% of GDP in 2020, as originally planned.
The European Central Bank began exchanging Greek bonds purchased below face value on the secondary market. It intends to redistribute the gains realized states of the euro area, so that they can share it with Greece, again in ways that have not yet been fixed. The idea of reducing interest rates on loans already in Athens is also on the table but would yield relatively small, according to a European source. Whatever the outcome of the meeting, it will not be the end of the Greek drama as much now depends on political will from Athens to implement its part of the contract.
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