No decisions were reached after the contacts marathon of the Prime Minister and the extraordinary meetings in Brussels on Monday, although the foundations were laid for an agreement within the next 48 hours. The new proposals of the Greek government were accepted by the institutional representatives of the creditors as a basis for discussion; nevertheless, as the heads of both the Eurogroup, Jeroen Dijsselbloem, and the IMF, Christine Lagarde, emphasised upon their departure late at night, “a lot of work still needs to be done” in order for the proposals to translate into an agreement.
At the press conference that followed the conclusion of the extraordinary Eurogroup meeting -which preceded the extraordinary Eurozone Summit- Jeroen Dijsselbloem pointed out that the technical evaluation of the proposals by the institutions remains to be completed, in order for the necessary calculations to be made as to the budgetary outcome of the measures, as well as to define prerequisite actions, the process of their implementation and their coupling with the disbursements.
However, specific issues which are deemed important from a political rather than a technical perspective also remain open. First of all, the duration of the extension period. According to sources, the Greek side wishes to secure the broadest possible time settlement, so as to combat the uncertainty tormenting the Greek economy and to put an end to the suffocation of Greek public funds due to the restrictions imposed by the ECB.
Secondly, the debt issue. On Monday, it became clear once again that a significant majority of the Eurozone member-states are still strongly opposed to a possible future settlement of the Greek debt. Amidst an atmosphere of total distrust, these members even resist making any kind of commitment towards the Greek government. Nevertheless, in the bras-de-fer between Greece and its creditors the IMF also has its role as a “wildcard”. On the one hand, the Fund is asking for assurances of sustainability of the Greek debt and a possible promise by Greece’s partners on debt restructuring, similar to the decision of November 2012. On the other hand, it seems that the IMF has come to terms with the current fiscal measures apparently included in the Greek proposal = worth many billions. Asked about whether the issue of the Greek debt was discussed in the Euro Summit, Commission head Jean Claude Juncker said that this was not the proper time to hold this discussion. In her statements to the press after the Summit, German Chancellor Angela Merkel said that although the future of the Greek debt remains an open question, the German legislation places restrictions on the further financing of Greece through the European Stability Mechanism. She further noted that Greece will not be asked to repay a large part of its debt before several years have passed, while French President Hollande also said that the issue of debt was not discussed today, suggesting however that this will indeed happen at a later time.
Liquidity and financing
Another issue of great significance that seems to be pending concerns the immediate financing of the Greek economy, in order for the government to be able to fulfill its loan obligations at the end of the month. The Greek side excludes the possibility that it will be unable to pay the installment to the IMF worth €1.6 bn., provided that an agreement will have been reached by June 30. The creditors and their institutional representatives, however, have made clear that any disbursement is conditional on the implementation of agreed measures, which is of course impossible to achieve in one week. In this context, the Greek side expects the relevant authorities to take all necessary immediate measures to secure the repayment of the IMF, possibly through the ECB increasing the limits on Treasury bills.
In conclusion, it is worth noting that Monday’s consultations on all levels, from the technical to the highest political level, took place against a backdrop of increased pressures on the Greek banking system due the continued outflows of capital. In a clear move of degradation of the agreement that is currently in the making, the German Finance Minister, Wolfgang Schäuble, said that nothing new is included apart from certain attempts to create expectations which are nevertheless not accompanied with the necessary substance. Based on other leaks, the most stringent voices within the Eurogroup even raised the issue of capital controls, although the ECB governor did not respond to those calls. Indeed, government sources said that Mario Draghi assured the Prime Minister in a private meeting that the stability of the Greek banking system is ensured until the end of the programme, which runs until June 30. For his part, Jean Claude Juncker said that there was no discussion on capital controls, when asked relevantly.