Greece hopes for timely release of enhanced loan installment

Prime Minister Antonis Samaras sought on Tuesday to appear upbeat on the prospects of crucial rescue loans being released to Greece even as Finance Minister Yannis Stournaras warned that the risk of the country defaulting on its huge debt was still very real.

Stournaras and Samaras returned to Athens last night hopeful that foreign creditors will release not only a pending 31.5-billion-euro rescue loan but another two loans worth 12.5 billion euros after European officials made positive noises about Greece’s progress in approving and implementing austerity measures and reforms.

Samaras, who met with European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso in Brussels, declared that “Greece has already turned the page,” noting that only “technical details” remained before funding could be released.

Earlier in the day Stournaras had been significantly more reserved, saying in a speech before the European Parliament’s economic and social affairs committee that the risk of Greece defaulting was still real. “The troika is pressing us very hard to implement prior actions,” he said, referring to measures and reforms demanded by the troika. “But the risk of an accident is very great,” he said.

Speaking to reporters in Brussels, German Finance Minister Wolfgang Schaeuble said that Greece had made “significant decisions in the right direction” and would get three aid tranches before the end of the year, adding however that this would necessitate the operation of an enhanced “control mechanism” for the funding. Schaeuble did not provide any details but, clearly mindful that such supervision would ruffle feathers among Greeks, he acknowledged that the issue of such a mechanism was sensitive in Greece, adding however that he was confident Greek ministers would agree to it in a bid to restore confidence in Greece.

“This topic has a certain sensitivity in Greece and that’s why it’s important that it’s dealt with publicly in a certain way,” Schaeuble added.

One of the aspects involved in the enhanced control mechanism that Berlin would like to see is the bailout loans being paid into a special account, through which lenders could ensure that the money is not spent to cover Greece’s primary deficit unless outstanding debt obligations can be met.

This account already exists at the Bank of Greece but there had been suggestions by some eurozone officials that it should be located outside the country. It appears that this option is now off the table and that the account will remain in Athens.

Beyond that, the terms in a draft version of a new memorandum of understanding between Greece and the troika foresees that Athens will be obliged to automatically make fiscal adjustments if it is not meeting budget targets. This includes making up for any shortfall in revenues from privatizations. Greece will also agree to using 70 percent of any revenues beyond its targets for growth and welfare-related projects.