No aid authorized for Greece despite vote on austerity


Tue, Nov 13, 2012 - Page 1

The eurozone will not authorize more money for Greece, despite the country approving a tough budget for next year, because there is still no agreement on how to make its debts sustainable.

However, finance ministers meeting in Brussels were expected to give Athens two more years to meet its goals in talks about unfreezing lending to Greece.

Loans have been held up after Athens went off-track with promised reforms and budget cuts, largely as a result of holding two elections in the space of three months.

The Greek parliament passed an austerity budget for next year late on Sunday and a structural reform package on Wednesday last week, meeting the conditions for the release of the next tranche of 31.5 billion euros (US$40 billion) of emergency loans from the eurozone.

However, officials said the money would not be released yet.

“I am impressed by Greece’s recent performance ... Greece is on track to meet its commitments step by step,” the chairman of eurozone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, told reporters on arriving for the meeting.

“There won’t be any definitive decisions today, but I think the general feeling is that we would like the next disbursement to be done in the most efficient way possible,” he said.

The ministers will examine the commitments Greece has made on overhauling structural problems in its economy and assess whether its program is getting back on track.

Juncker said a report by the EU and IMF into the Greek economy, known as the troika report, had been submitted overnight, but officials said a critical element of it — an evaluation of Greece’s debt position — was not yet ready.

The debt analysis looks at how to reduce Greece’s debts from a forecast 190 percent next year to about 120 percent by 2020 — a level the IMF has deemed sustainable in the long-run. It remains unclear when the analysis will be finalized.

European Central Bank (ECB) board member Joerg Asmussen told Belgian daily De Tijd on Saturday that Greece would fail to meet the 2020 target under current policies, ending up with debt of more than 140 percent of GDP.

International lenders — the IMF, the ECB and the European Commission, called “the troika” — cannot yet agree on a single estimate for Greek debt in 2020 or on the best way to reduce it. Estimates between the institutions on the debt in 2020 differ by between 10 and 20 percentage points, officials say.

Once there is an agreement on the debt analysis, it will be sent to national parliaments to get approval for the disbursement of the next aid tranche — money Athens needs to pay off loans and shore up its banks.

“I think it’s rather unrealistic to expect a final decision today as in Germany, the Bundestag [lower house of parliament] has to agree to it in advance,” German government spokeswoman Marianne Kothe said.

One thing the lenders do agree on now is that Greece, which will see its sixth year of deep recession next year, needs at least two more years to reach a primary budget surplus that would put its debt on a downward path.

The extra time would allow the economy to start growing again, otherwise it would never produce enough for the country to repay its debt.