Brussels, 16/07/2015 (Agence Europe) - The storm clouds lifted somewhat for Greece on Thursday 16 July after Eurogroup made the official decision to negotiate a third bailout programme for the country and the ECB offered some relief for the Greek banking sector.
The Commission welcomed the vote on Wednesday at the Greek parliament, which endorsed by 229 to 64 the first round of prior actions demanded by the eurozone summit (see EUROPE 11358). “This is an important step to rebuild trust,” said European Commission spokesperson Annika Breidthardt.
Slovakian finance minister Peter Kazimir tweeted: “I welcome the positive vote of the Greek parliament, but this is the easier part of the deal. The real trouble and challenges may come later. No majority, no ownership, could dent implementation of measures and reforms.” Finnish finance minister Alexander Stubb, said he was concerned about statements by the Greek prime minister, Alexis Tsipras. That he didn't believe in the agreement, but it was all he had been able to win.
The Slovakian parliament does not need to vote on the eurozone agreement, but the relevant Finnish parliament body gave its go-ahead on Thursday to the opening of talks on a third bailout and bridging finance. The German Bundestag will vote on Friday.
If it votes in favour, talks on the third aid programme will begin after the final go-ahead is given by eurozone finance ministers in their role as governors of the European Stability Mechanism (ESM). ESM director general Klaus Regling said Thursday that the ESM would provide up to €50 billion in aid.
Agreement on an immediate bridging loan of €7 billion. The 'institutions' (European Commission, ECB and IMF) worked during the night to assess the Greek parliament's vote, which saw a split in Syriza and will therefore lead to a reshuffle. Greece has implemented the first step in the process leading to talks on a third bailout in a timely and overall satisfactory manner, and the Greek vote also meets the criteria laid down for a one-month bridging loan, once it has been approved.
The silent procedure at the Economic and Finance Committee (EFC) was still ongoing as EUROPE went to press and the written procedure at Eurogroup for validating the agreement is expected to be completed at midday on Friday. Valdis Dombrovskis, vice-president of the European Commission with responsibility for the euro, tweeted that the EU28 had agreed in principle that the European Financial Stabilisation Mechanism (EFSM) could immediately raise €7 billion to prevent a further default by Greece on repayments to the ECB on Monday 20 July. To reassure the most reluctant eurozone countries, profits made by the ECB from the SMP purchasing of Greek bonds will be used for this.
On Thursday, the ECB announced that it had raised the emergency lending cap (ELA) by €900 million for Greek banks for a week. ECB president Mario Draghi said the situation had changed because of the looming third bailout and the vote at the Greek parliament. Greek banks will be able to partially re-open on Monday. Draghi said that easing of the Greek debt was not controversial in and of itself, and the real question was in what form such an easing could take within the established institutional set-up.
Discussing the Greek debt, the head of Eurogroup, Jeroen Dijsselbloem, said that Eurogroup and the IMF were prepared to discuss debt-servicing. A Eurogroup statement in November 2012 set the objective of a debt/GDP ratio of 124% in 2020 and substantially below 110% in 2022, but the institutions' most optimistic forecasts are for a ratio of debt to GDP of 165% in 2020, 150% in 2022 and 111% in 2030 (see EUROPE 11357). These debt/GDP ratio targets should therefore be abandoned in principle. The details will need to be settled over the next few weeks. The IMF says a public debt is deemed viable if the ratio of gross financing needs as a proportion of GDP is below 15%, explains an analytical report by the three institutions. Dombrovskis said eurozone loans with their favourable conditions were not a burden on the Greek budget. The whole question of reducing the Greek debt is of course highly political. (Elodie Lamer and Mathieu Bion)