Eurozone finance ministers on Friday asked Greece to deliver a set of additional cost-cutting measures that would be implemented if its finances go awry, making it a condition for Athens to continue receiving bailout aid.
The demand could complicate already drawn-out negotiations between Athens and its international creditors on the way forward for its bailout programme. It has been four months since the cash-strapped country received its last disbursement.
The contingency measures are needed to give "that extra assurance and confidence" about Greece's future to eurozone countries, investors and markets, Dutch Finance Minister Jeroen Dijsselbloem said after chairing a meeting of the ministers' Eurogroup panel in Amsterdam.
The details of the contingency measures still have to be worked out, but the ministers want them to reach 2 per cent of Greece's gross domestic product (GDP). That would amount to about 3.5 billion euros (3.9 billion dollars) based on last year's figure.
"[They] have to be legislated upfront, they have to be credible, they have to be triggered with a degree of automaticity that does not give too much room for discretion," said Christine Lagarde, the chief of the International Monetary Fund (IMF), one of Greece's creditors.
The IMF has been sceptical of economic forecasts used by Greece's European creditors. Lagarde welcomed new data released Thursday that showed Greece's public deficit and debt to be lower than expected in 2015, but also warned that the figures may be revised.
The contingency measures would be "an extra insurance in case something happens unexpectedly," said Klaus Regling, the head of the eurozone's bailout fund.
But Greek Finance Minister Euclid Tsakalotos warned that difficulties lay ahead.
"Within Greek law, you cannot legislate contingently," he told journalists in Amsterdam. "You cannot say you will do X if the state of the world Y is in place in 2018 or 2019."
Dijsselbloem nevertheless said that Tsakalotos had committed to work on the contingency measures "constructively."
The Eurogroup is ready to hold a special meeting next Thursday if enough progress is made on the contingency plans and a previously required package of reforms and cost-cutting measures amounting to 3 per cent of Greece's GDP. There has been "substantial progress" on that front, Dijsselbloem said.
The two packages would free the way for the next tranche of aid to be disbursed under Greece's third, 86-billion-euro bailout, according to the Eurogroup chief.
A highly anticipated discussion about further debt relief for Athens is also expected to be held in parallel. It could challenge unity within the European ranks.
"The topic [of debt relief] cannot distract people from doing what needs to be done," German Finance Minister Wolfgang Schaeuble warned.
Dijsselbloem said he had been tasked by the ministers to start drawing up options. There is no support for a reduction in value or "haircut" of Greek debt, but extended maturities and grace periods would be considered, he added.
There have been fears that Greece could return to the brink of bankruptcy if a breakthrough is not achieved soon. Dijsselbloem said there was a clear "sense of urgency" at the Eurogroup talks.
"What we all want to do this year is to avoid a hot Greek summer," Finnish Finance Minister Alexander Stubb added. "A head-on collision this summer, I don't think that's in the interest of anyone."
Monday, May 9, 2016 - 20:54
Tuesday, May 24, 2016 - 16:15