Brussels, 21/08/2012 (Agence Europe) - The president of the Eurogroup, Jean-Claude Juncker, is in Athens this Wednesday, nearly a month after the visit of the president of the European Commission, José Manuel Barroso (see EUROPE 10664). The objective of his visit is to review the progress on work in Greece to get the second adjustment programme on the rails, after the delay that has built up since the spring due to the political crisis and the economic recession being more acute than predicted. No decision on paying a new tranche of financial aid to the Greek state will be taken until the institutional creditors are certain that the Greek authorities have the situation in hand and are respecting their commitments with regard to the second financial bailout. At the earliest, a decision will be taken in mid-September at the informal Ecofin Council in Nicosia.
Greek Prime Minister Antonis Samaras will be keen to show the head of the eurozone that his government is ready get down to work. The authorities must ratify new unpopular measures if they want to be able to negotiate with their institutional creditors an extension of the deadlines for respecting the budgetary objectives and implementing the economic reforms.
Formed by conservatives from New Democracy and socialists from PASOK, and supported in the parliament by the Democratic Left, the coalition in power is having trouble reaching an agreement on the nature of the measures to take. For 2013 and 2014, savings valued at €13.5 billion would be envisaged, which is €2 billion more than planned for the second Greek bailout, the daily newspaper Ekathimerini reports. In spite of the campaign promises of the coalition parties, new cuts should be made on salaries and pensions above €800. In order to limit their effect on a population hostile to any additional drain on its purchasing power, the government would consider introducing these cuts progressively. In addition, to progressively reduce the size of the Greek public sector, a new mechanism of setting civil servants aside would be studied. Guarantees should also be given on privatising assets held by the state.
In Samaras' opinion, this meeting with Juncker seems a general rehearsal for the big discussion he will have in Berlin on Friday with the German chancellor, Angela Merkel, and the following day in Paris with the French president, François Hollande. In Berlin on Thursday evening, at a dinner dedicated to the sovereign debt crisis in the eurozone, the leaders of the two main economies of the eurozone will refine their positions on the Greek dossier.
The beginning of August was quite calm on the financial markets. On Tuesday 21 August, Spain took advantage of this to borrow in the short term at rates in strong decline in comparison with an equivalent operation previously. The prime minister of Luxembourg also blew hot and cold about the place of Greece in the eurozone. This member state will not exit the euro crisis “if Greece ridicules all its commitments and doesn't respect a single agreement”, he said last week to the Austrian newspaper “Tiroler Tageszeitung”. At the beginning of the month on the German television channel WDR, he had nevertheless considered that the hypothesis of such an exit was “manageable” but not politically desirable. The visit of the president of the Eurogroup will also be the occasion for Samaras to ask him to clarify his thoughts.
In this vein, while declaring himself 100% committed to the stability of the euro, the Finnish minister for European affairs, Alexander Stubb, hurried to minimise the sentiments of his colleague for foreign affairs, Erkki Tuomioja, according to whom the Finnish authorities have worked out an action plan in case of Greece's abandonment of the single currency. Finland has negotiated a bilateral agreement with Greece guaranteeing it a privileged re-imbursement of loans that it grants Athens.