The European Investment Bank is said to have frozen funding for small and medium-sized Greek enterprises (SMEs), citing developments in the negotiations between Greece and its creditors, conditions in the local banking sector and the downgrading of the country’s credit rating.
This complication is reminiscent of a similar issue that arose in 2012, when Greece had to tackle rumors about a eurozone exit and a credit rating downgrade, leading the EIB to adopt a tough stance on financing for the country by freezing disbursements.
The issue was brought to light this time through a question in Parliament from New Democracy deputy Costis Hatzidakis to the ministers of economy and finance, asking them what kind of action they planned to take for the SME subsidy program to continue. The new complication concerns the funding of SMEs through the Guarantee Fund, for which 500 million euros had been set aside from the EU-subsidized community support framework (ESPA) as the state’s contribution.
With an equal contribution from the EIB, a total of 1 billion euros would be provided to support the investment plans of SMEs through loans. Applications of 590 million euros have been approved so far, meaning that just under 300 million euros of EIB funds has already been committed. The question now is whether the Guarantee Fund will receive the whole of the remaining 400 million euros, as the slow issue of loans had put coverage of the remainder in question, given that it must be disbursed by the end of the year.
Sources from commercial lenders, through which the loans are issued, say that the EIB no longer appears to be responding to new requests for funding approvals within the limit agreed (1 billion euros). The freezing of new approvals is attributed to the EIB’s risk management domain, which has apparently proposed the postponement of the bank’s activity in Greece. It is said to have cited pressure from international rating agencies to include additional provisions in the EIB report on Greece. The EIB has issued no official statement on the issue and argues there is no problem with Greek funding.