Germany sends message by blocking release of last tranche


Berlin on Thursday blocked the disbursement of the last bailout installment to Greece, worth 15 billion euros, due to Athens extending the value-added tax discount on five Greek islands without securing the approval of its creditors first. Greek banks are also losing access to cheap liquidity through the European Central Bank’s waiver on Greek government bonds, while the country is losing the chance to participate in the ECB bond-buying program.

For the tranche to be unblocked by early August, Finance Minister Euclid Tsakalotos pledged at yesterday’s Eurogroup that the measure to retain the 30 percent VAT discount on Lesvos, Chios, Samos, Leros and Kos will end in January 2019, and that the loss of 28 million euros of revenues will be offset from other sources. The amount may not seem significant, but the German government was eager to send a message to Athens that it will not tolerate any deviation from the program in the future.

As a result, the Eurogroup decided the tranche will be likely paid in the first few days of August, after Athens has approved cuts worth 28 million and the Bundestag has approved them.

Asked whether there is any fiscal scope for the pension cuts planned for 2019 to be averted, Eurogroup chief Mario Centeno and European Stability Mechanism Managing Director Klaus Regling stressed there should be no change to what has already been agreed. “The next stage, the end of the program, is very important for the building of confidence in Greece, which must remain loyal to the pledges made in the course of the program,” Centeno said.

Meanwhile, ECB Governing Council member Benoit Coeure put an end on Thursday to scenarios for a Greek entry into Frankfurt’s quantitative easing program, and banished any hopes that the Greek exemption to the rule for rejecting junk-rated bonds as collateral for cheap liquidity from the ECB would be extended.

He said that the so-called waiver is granted only if a country is in a program, which the enhanced surveillance is not. He added that as the timetable for the disbursement has now changed, it is certain Greece cannot participate in the QE program.