Brussels, 26/07/2013 (Agence Europe) - The unused portion of cash for recapitalising Greek banks does not look at the moment as if it will be enough to fill the gaps in financing the Greek structural adjustment programme, said a European source on Friday 26 July, indicating that a funding gap of €3.8 billion would emerge in 2014, but adding that the plan was fully financed until the end of July 2014.
In the autumn, as is standard practice, the International Monetary Fund (IMF) will demand full visibility for the year ahead for financing of the Greek programme as a precondition for its participation in the aid programme. The European source said that the troika of lenders (European Commission, European Central Bank and IMF) would start examining the question over the next few weeks, ahead of its monitoring mission in September. In mid-July, the Commission said that, as a result of greater-than-expected private sector involvement in the recapitalisation of Greek banks, not all the €50 billion of aid earmarked for the banks would be needed (see EUROPE 10890), with a Commission spokesman suggesting that the unused cash could be used to fill any gaps in the aid programme. On Friday, the above-mentioned European source said that €25 billion of the €50 billion for the banks had been used for recapitalising the country's four “too-big-to-fails” and €15 billion for bank resolution, thus leaving a potential of €10 billion. Banks will need to sit new stress tests to see whether they might need extra capital at the start of next year and, if any money were left over, then it would not be until 2014 that this would be known, so it would not be of any help in the autumn. The source added that a gap of €3.8 billion was not enormous and was perfectly manageable. Greece borrowing money from the financial markets itself in the short-term could be one way of filling the gap. The gap has emerged due to central bank reluctance in the Eurosystem to roll over their Greek bonds (so they mature at a later date). The source commented that this would be too similar to a financial bailout.
The short-term financing of the Greek programme is assured and on Friday morning, the euro working group at the Council of Ministers gave the go-ahead for the disbursement of €2.5 billion in aid and €1.5 billion in returned profits on the SMP sovereign bond purchase programme by central banks in the Eurosystem. The cash will not be paid out until various countries' parliaments have endorsed it, but on Thursday, Greece met a precondition for the disbursement by voting through a law to change the tax code and slim down the civil service.
The European source said that the Greek programme was generally on track, despite slow progress in some areas, like the privatisation programme. To achieve its targets under the programme, Athens will have its work cut out for it in 2014 because it will not meet all its targets for 2013. The source hailed the budget consolidation that has been achieved in Greece and said it was possible that the country would make a primary surplus at the end of the year, but that would only become clear in the spring of 2014. (EL/transl.fl)