Will Debt-laden Greece get Bailout on Time?
Greece moved closer to winning a delayed aid disbursement on Friday. Speaking to reporters at a European Union summit, Prime Minister Antonis Samaras said that the country would soon go broke if it did not. “I believe that the disbursement will have finished by mid-November. The country’s Euro cash reserves are running out on November 16,” he said. Transfers have been frozen since June & the Greek economy and society are on the brink. The next aid payout is scheduled to total 31 billion euros, most of which would be to recapitalize banks. That disbursement would be under a 130 billion-euro rescue package approved earlier this year after an initial 110 billion-Euro Bailout in 2010. By acknowledging that good progress has been made to bring the adjustment program back on track, it will be difficult to deny Greece a tranche of aid so it can service its debt that remains largely in the Troika’s hands.
At his first European Union summit since becoming premier in June, Samaras said record Unemployment (jobless rate reached 25%) showed the price Greece was paying for austerity demanded by the Euro area as a condition for emergency loans. He urged parallel steps to kick- start the economy and stuck to a request for two extra years until 2016 to meet targets for narrowing the budget deficit, prompting signs of European goodwill. The “Troika” of lenders still disagreed over the size of Greece’s debt and how to cut it. The “Troika” has been withholding about 36 billion euros of funds the country needs to repay debt and re-float its cash-strapped banks. It wants action on cuts and reforms set under the terms of a 130 billion Euro EU/IMF bailout agreed in March. A number of European leaders at the summit praised Athens for its progress in talks with its lenders, and most austerity measures, cuts and reforms have been agreed. “We expect Greece to continue budgetary and structural policy reforms and we encourage its efforts to ensure swift implementation of the program,” the Euro-area leaders said. “These conditions will allow Greece to achieve renewed growth and will ensure its future in the Eurozone.” “I am very happy with the performance the Greek government has undertaken,” Juncker, who also heads the group of euro-area finance ministers, told reporters as he emerged from the first EU summit session. “Now it’s up to the other 16, after Greece will have delivered, to deliver.” Troika experts, however, still disagree on some aspects, Samaras said. The IMF said earlier this month that it expected Greek debt to stand at 153% of GDP in 2017, a much higher level than the 120% target the country is supposed to hit in 2020 under its bailout plan.
Greece is nonetheless seen missing its debt and deficit targets, which has fueled talk that the country might be forced to leave the Eurozone. But Eurozone leaders said on Thursday good progress had been made to bring the adjustment program back on track. Several of the bloc’s leaders voiced support for Greece earlier this month, including German Chancellor Angela Merkel who visited Athens last week. French President Francois Hollande and Italy’s Prime Minister Mario Monti will also soon visit Athens, Samaras said.
Greece hopeful on EU Summit Outcome:
European Union leaders meeting at the Summit agreed a single supervisor will take responsibility for overseeing Eurozone banks from next year. But the leaders, who met on Thursday and Friday, left for another time the details on the precise number of banks to be monitored and the powers to be given to the supervisor- the European Central Bank. French President Hollande said, “What I want, my objective is that after the Greeks have made a lot of effort and the coalition government of (Greek Prime Minister Antonis) Samaras has made a commitment, I want this to be quickly decided so that expecting funds can be quickly disbursed in the coming weeks after the (ECB/IMF) troika’s report. The question of Greece’s presence in the Eurozone should no longer be asked.” “The discussion between the troika and Greece is in its final phase. The position we adopted, during the night, was to state that progress has been made. There are still some clarifications awaited but the process is going in the right direction and the future of Greece is in the Eurozone. “I had a meeting with the Greek prime minister. We agreed I would make a visit there but a date has not yet been fixed. The sign which I wish to send is a sign of confidence in Greece and the conclusion which must be brought to the discussions once the troika’s report is presented.”
On Spanish Banks & Recapitalization, Merkel said, “The Spanish banks have a capital need that has been specified. The Spanish banks have a program for recapitalization that has been agreed. There won’t be any retroactive bank recapitalization. When the recapitalization is possible then it will be possible for the future afterwards. When the bank supervisor is installed, I think that we won’t have a problem with the Spanish banks, that’s at least my hope,” reported Reuters. Over the weekend two Spanish regions, Galicia and the Basque country, are set to hold elections. These elections are “seen as a hurdle the Spanish government wants to pass before formally requesting aid. Depending on how the elections turn out could influence what Spain does in terms of asking a bailout.
ECB to Supervise EU Banking Union:
European Council President Herman Van Rompuy said the 27 leaders agreed at a Brussels summit to adopt a legal framework by the end of this year giving the European Central Bank overall responsibility for banking supervision. The point when the ECB will effectively become the Eurozone’s banking supervisor is important because it would open the way for the Eurozone’s bailout fund to inject capital directly into troubled banks, without adding to their host governments’ debts. EU officials said all 6,000 banks in the single currency area would gradually come under ECB supervision by 2014, starting with banks receiving state aid. However, the agreement appeared to be a defeat for German Finance Minister Wolfgang Schaeuble’s efforts to delay and limit the scope of European banking supervision. Germany has been reluctant to see its politically sensitive savings and cooperative banks come under outside supervision. It rejects any joint deposit guarantee under which richer countries might have to underwrite banks in poorer states.
The Merkel Hurdle:
EU leaders agreed at a two-day summit that the European Central Bank will take responsibility for overseeing Eurozone banks from next year, but German Chancellor Angela Merkel said it would take time for the new supervisor to be fully effective. Merkel raised new hurdles to using the Eurozone’s rescue fund to inject capital directly into ailing banks from next year, dashing Spain’s hopes of soon removing the cost from its strained national debt. Merkel’s move limited the impact of a key decision by European Union leaders struggling to overcome a three-year-old debt crisis in the 17-nation currency area, an overnight agreement to establish a single banking supervisor from next year. Merkel denied that the obstacles were intended to avoid any payments having to be approved by the German parliament before the 2013 election, saying the idea had never crossed her mind. French President Francois Hollande said on day one of the summit that Germany’s lack of urgency could be related to its electoral calendar, adding that the two dominant EU powers had a duty to solve the crisis.
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