Brussels, 05/11/2014 (Agence Europe) - In Brussels this Thursday 6 November, the finance ministers of the eurozone are meeting to discuss the poor economic situation and hold preliminary talks on Greece's exit from its bailout plan. The case of Cyprus, which is awaiting a tranche from the European Stability Mechanism (ESM), will also be discussed.
The ministers will take stock of the economic situation in the eurozone, following the downwards revision by the European Commission of its economic forecasts for 2014 (+0.8% of GDP) and 2015 (+1.1%) (EUROPE 11190). Following the stand-off between countries, such as Italy and France, and the European Commission (EUROPE 11186 and 11187), there will be no question just yet of any assessment of the draft national budgets for 2015. A specific Eurogroup meeting may be held on Friday 21 November.
Greece. The Eurogroup will take stock of the fifth monitoring mission of the 'troika' (European Commission, ECB and IMF), on ice due to agenda questions since early October. The Commission has yet to take position on a new date for the country's creditors to return to Athens. In order to decide, it expects sufficient progress to be made in the anticipated reforms.
According to a senior EU official, most of the ministerial talks will be taken up by the Greek minister's presentation of how the country plans to leave its second bailout plan. In order to allow any necessary parliamentary procedures of individual countries to take place, an agreement will be needed at the Eurogroup meeting of 8 December.
Simply exiting the bailout plan “seems highly unlikely”, the same source told us. It anticipates an end of the “structured contractual relationship” with the eurozone, in which the IMF will necessarily be involved. However, Greece wants to turn down the final IMF loans and leave the bailout plan linking it to the Washington-based institute at the same time as it leaves its programme with the eurozone. In an interview with Reuters on Wednesday 5 November, the Greek finance minister, Gikas Hardouvelis, spoke of a transition period of six months to one year, during which Greece would be subject to limited supervision by the IMF and the eurozone, but not the 'current micro-management'.
“The Greeks are grasping at any reason they can” to explain why they will not need a precautionary credit line from the ESM, another diplomat close to the talks explained. This diplomat does not believe that the eurozone states will be convinced. Indeed, Greece's situation remains vulnerable, as shown by the recent volatility in Greek borrowing rates. “They are saying that it is because of the risk of elections, but I don't think that's the reason”, the source continued.
A number of sources acknowledge the fact that the Eurozone is taking position in favour of the so-called enhanced conditions credit line ('ECCL'), which is more binding and intrusive than the precautionary conditioned credit line ('PCCL') (EUROPE 11189). “Access to Greece's markets is so limited” that it has virtually eclipsed any discussion of the other eligibility criteria for a conventional credit line, according to the senior EU official. Although the 'ECCL' provides for a memorandum of understanding (MoU) detailing the corrective measures to be taken and regular monitoring missions, there is also the option to relax the terms of this to make it a less bitter pill for the Greeks, already exhausted after years of austerity. Hardevoulis confirmed to Reuters that the precautionary credit line would somewhat resemble the 'ECCL'.
Paying back the envelope of around €11 billion from the Hellenic Financial Stability Fund (HFSF) not used for the Greek banks and using this as a precautionary credit line would be an option. The advantage cited by the Greeks is that there would be no fresh money made available by the ESM, but it would consist of the money already lent. This option would get round the familiar straitjacket of national procedures. A number of delegations take the view, however, that the sum is scarcely credible, as it is too low - and some states would rather the money remain in the HFSF. However, the Commission said last week that much of this envelope could theoretically be returned to the European financial stability fund (EFSF).
Lastly, the same source told us that Greece had by no means given up hope that the Eurozone will make a gesture to reduce its public debt. This scenario would be possible “if the Greeks made the necessary structural efforts of the programme, but talks are at a stage at which several countries do not agree”, the source explained. Portugal and Spain reportedly do not appreciate the fact that they made efforts without the benefit of similar treatment. The source added that the precautionary credit line should be one of the pre-requisites for any alleviation of the debt.
Cyprus. The ministers will also discuss the Cypriot dossier. The country's Supreme Court has declared unconstitutional a number of laws voted on by the national parliament in relation to repossessions of real estate, rendering this legislation obsolete (EUROPE 11189). On Monday, the eurozone had not yet been informed of the government's plans, “but this could be a step in the right direction”, in the view of the senior official. At stake is the payment of a tranche of €350 million under the ESM. (EL and MB)