Creditors split in two camps over post-bailout era

On the one side is the European Commission, whose approach is shared by the Greek government and supported by France, which is in favour of a “clean” exit. That means a permanent return to the markets in summer of 2018, armed with a reform roadmap up to 2021 and a cash buffer of 19 billion euros,

05.03.2018 15:16

Newsroom

Creditors split in two camps over post-bailout era

epa02995638 Mario Draghi, the new president of the European Central Bank chats with President of the Euro group Luxembourg's Prime Minister Jean-Claude Juncker (R) chat at the start of a Euro Group European finance ministers meeting at the European council headquarters in Brussels, Belgium, 07 November 2011. Eurozone finance ministers will not finalize a key crisis-containing measure on Monday, officials said at the start of an evening meeting in Brussels that was taking place after market pressure intensified on Italy and Greece. To prevent contagion, eurozone leaders had agreed last month to boost their bailout fund‘s firepower to 1 trillion euros (1.37 trillion dollars). The ministers had been expected to hash out the technical details. EPA/OLIVIER HOSLET (File: INT10573236.jpg )

05.03.2018 15:16

International

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On the one side is the European Commission, whose approach is shared by the Greek government and supported by France, which is in favour of a “clean” exit. That means a permanent return to the markets in summer of 2018, armed with a reform roadmap up to 2021 and a cash buffer of 19 billion euros,

As Greece enters the final stretch towards completion of the third bailout memorandum, after the expected approval of the 5.7 billion euro loan tranche on Friday, institutions and creditors appear divided into two camps regarding arrangements in the post bailout memorandum era.

On the one side is the European Commission, whose approach is shared by the Greek government and supported by France, which is in favour of a “clean” exit. That means a permanent return to the markets in summer of 2018, armed with a reform roadmap up to 2021 and a cash buffer of 19 billion euros, which is enough to cover the country’s borrowing needs for the next two years.

Concerns about banks

The other camp is led by the European Central Bank (ECB), which wants Greece to request a precautionary credit line, a tool enshrined in the charter of the European Stability Mechanism (ESM). That line has been supported for months by Bank of Greece Governor Yannis Stournaras, and by main opposition New Democracy, which had been offered that option before the 2015 elections that swept Syriza to power.

The ECB-led camp is concerned about how healthy Greek banks are, and how prepared to contribute to the recovery of the Greek economy and businesses over the coming years.

The key is whether they will require a recapitalisation, which will become apparent in the ECB’s stress tests.

Thomas Wieser, the former head of the EuroWorking Group, is squarely in the ECB camp. “Life would be much easier for Greece if there were a security net, such as a precautionary credit line,” Wieser said on Friday.

Wieser said there may be a compromise under which Greece would take the credit line with certain commitments attached, but far fewer than any of the bailout memorandums.

IMF on the sidelines

The IMF has not yet taken a position in the debate, as it is waiting for the Europeans to decide on debt relief, so that the Fund may in turn decide whether to stay on board with the Greek programme, as an overseer and not a creditor.

All that will take four months to clear up, as the 21 June Eurogroup is expected to unveil the final, definitive debt relief measures, as well as the form of p

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