Euro area finance chiefs will decide tomorrow on the amount and pace of Greece’s next aid payments, Dutch Finance Minister Jeroen Dijsselbloem said.
Greece needs another infusion of money to avoid default in May, when it has to repay 12.5 billion euros ($17.2 billion) of government debt. The Mediterranean nation has faced repeated delays in accessing a 130 billion-euro bailout package, its second, and hasn’t received a payment since December.
“The speed of disbursements will be adjusted to the needs, but we will decide Tuesday,” Dijsselbloem, who heads meetings of euro-area finance ministers, said in an interview late yesterday en route to Larnaca, Cyprus. He said “a bit more than 8 billion is now foreseen” for the next aid tranche.
Dijsselbloem said euro-area ministers will focus on current developments and postpone talk of debt relief or a third rescue package for Greece. Ministers also will examine conditions in Cyprus, where the economy has been hit hard by the conditions that forced it to seek aid last year.
Greece and Cyprus have been pummeled by the euro area’s sovereign debt crisis, which forced five of the euro area’s 18 nations to seek rescues. Ireland and Spain already have exited their aid programs, and Portugal is seeking to regain full access to financial markets as its bailout approaches its end in May.
Issuing debt may also be possible for Greece depending on market conditions, Dijsselbloem said.
“Greece is now working on returning to the capital market; they want to do that this year,” Dijsselbloem said. “This will of course be careful, with limited amounts, but it is important to wait for that and see how it goes.”
To win the next disbursement, Greece needed to pass legislation implementing hundreds of economic reforms, from changing the way banks are recapitalized to lifting restrictions on the sale of goods and services. The bill was approved early today in a contentious vote that led to further divisions in Greece’s parliamentary majority.
Three legislators in Greece’s governing coalition, including former Prime Minister George Papandreou, didn’t vote for all of the articles of the bill. Another member of parliament who abstained, Nikitas Kaklamanis, was expelled from the coalition, thus leaving the government with 152 of 300 parliament members.
If Greece does need a third program, it will be smaller than the nation’s previous bailouts, the Dutch finance chief said. The euro area also could offer Greece debt relief, which could come in the form of lower interest rates or longer maturities on existing loans, he said.
“That discussion will take place after summer,” Dijsselbloem said, adding that Greece’s economic performance would be a factor in how the euro area proceeds.
German Finance Minister Wolfgang Schaeuble said today that he’s “relaxed” about the impact of Greece’s problems on the euro. “Financial markets meanwhile understand that the euro can’t go down the drain even if Greece is having problems,” he said in remarks to students in Berlin.
For Cyprus, the economy is expected to continue to shrink as the country grapples with the aftermath of its financial crisis, Dijsselbloem said. The island nation is “performing a bit better” compared to expectations when it received its 10 billion-euro aid package last year and 2015 might bring some recovery, he said.
The Cypriot government has “complied with all the agreements made in the year behind us,” Dijsselbloem said. “They deserve our support.”