Ireland and Spain are practically out of recession and have convinced the other countries of the Eurozone about the soundness of their bailout exit strategy. None of the two countries shall need a precautionary credit line when they exit the bailout program without any extra measures.
Greece, on the other hand, needs “political urgency” and will have to comply with a series of strict criteria, including structural reforms and progress on the privatisations program.
This was the main conclusion of the meeting of the Finance ministers from the 17 Eurozone countries on Thursday 14 November in Brussels. Jeroen Dijsselbloem, the Dutch Finance minister and president of the Eurogroup, together with Olli Rehn, Vice-President of the European Commission in charge of Economic and Monetary Affairs announced that the Eurozone was not convinced about the way Greece is dealing with its foreseen fiscal gap for the years 2014-2015.
It was a rebuttal for Greece, whose Finance minister Yannis Stournaras insisted recently that there is a “distortion of reality” prevailing about his country’s economic and financial situation. The Greeks insist that divergences with the heads of the Troika – composed of officials from the European Commission, the International Monetary Fund and the European Central Bank – are les important than it is usually reported, and that by exaggerating them serious harm is done to Greece’s efforts of recovery.
Stournaras’s main mission in Brussels was to prevent new negative statements towards Greece and also to convince his Eurozone colleagues that it is for the Troika and not for Athens to back down on Greece s 2014 fiscal deficit. Unofficially, the figures are in the billions. The Greek government says it needs to find spending cuts worth a further €500 million, while the Troika estimates the current shortfall to be €2.9 billion.
The Finance minister Stournaras failed to convince his colleagues, while Ireland and Spain were praised for their bailout exit strategies (although they will continue to be submitted twice a year to a post-programme surveillance).
Nevertheless, it was decided that the next €1 billion tranche of the rescue package for Greece might still be disbursed before the end of 2013, if Athens shows political will to continue the reforms.
Although Ireland and Spain have received a satisfecit, the situation remains fragile, especially in Spain, and EC Vice-President Olli Rehn lambasted the past “irresponsible financial practices” that led Europe into the current situation.
On Friday, Eurozone ministers will meet their colleagues from the non-Euro countries in order to discuss how to set up a fund to rescue banks. Time is running out for the 17 Eurozone member countries, who, after having taken the political decision of creating a banking union, have now to find the concrete mechanism for putting it into practice. The ministers will discuss how to establish a European Union-wide bank single resolution mechanism (SRM) which would include all Eurozone banks, creating a new agency that could restructure bad banks so that taxpayers don’t have to pay to bail them out anymore.
If a deal is not found on Friday, that would mean leaving the issue for a last-minute summit in December.
Germany remained reticent until now, arguing that this would require changes in national legislation. EU officials insist that a deal is needed quickly so the agency can be established before the current EU parliament’s term ends in May next year.