Eurogroup puts off looking at Greek program until September
Eurozone finance ministers will discuss Greece?s bailout program in September after the troika has completed its inspection in Athens, the Eurogroup decided on Monday.
The troika is due to deliver a report on the state of the Greek program by the end of the month. This will form the basis for discussions between the Greek government and its lenders in August, when they are due to decide on possible changes to the program, such as an extension to the fiscal adjustment period.
The head of the Eurogroup, Jean-Claude Juncker, confirmed that Greek Finance Minister Yannis Stournaras «did not make any requests during tonight’s Eurogroup meeting» with regards to the Greek program but emphasized the government?s determination to «take the necessary measures to get the program back on track».
Juncker said the issue would be discussed in greater detail in September. He also said a solution would be found for the 3.2-billion-euro Greek bond held by the European Central Bank, which matures on August 20.
“There is no need to worry about Greece’s obligations» he said, without explaining how this bond would be paid. Kathimerini understands that either a clause will be triggered, extending the maturity by a month, or the European Financial Stability Facility (EFSF) will step in to pay it.
The eurozone ministers also agreed early on Tuesday to grant Spain an extra year until 2014 to reach its deficit reduction targets in exchange for further budget savings and set the parameters of an aid package for Madrid’s ailing banks.
No final figure was agreed for aid to ailing Spanish lenders, weighed down by bad debts due to a housing crash and recession, but the EU has set a maximum of 100 billion euros and some 30 billion euros would be available by the end of July if there was an urgent need.
A final loan agreement will be signed on or around July 20, said Juncker.
Ministers agreed that once a single European banking supervisor is set up next year, Spanish banks could be directly recapitalised from the euro zone rescue fund without requiring a state guarantee.
That fulfils an EU summit mandate to try to break a so-called «doom loop» of mutual dependency between weak banks and over indebted sovereigns, but represented a climbdown for hardline north European creditor countries.
?We reaffirm our strong commitment to do whatever is necessary to ensure the financial stability of the euro area, in particular through the flexible and efficient use of existing EFSF/ESM instruments for Member States respecting their Country Specific Recommendations and their other commitments including their respective timelines, under the European Semester, the Stability and Growth Pact and the Macroeconomic Imbalances Procedure,? said the Eurogroup statement.
?The Eurogroup has today reached a political understanding on the draft MoU underlying the financial assistance for the recapitalisation of financial institutions for Spain, to be provided via the EFSF until the ESM becomes available and then transferred to the ESM without gaining seniority status. The Eurogroup envisages providing the final approval of the programme by 20 July, after national procedures have been completed. The Eurogroup supports the recently adopted Commission recommendation to extend the deadline for the correction of the excessive deficit in Spain by one year to 2014,? the ministers added.
?In order to break the vicious circle between banks and sovereigns, technical discussions on the future ESM direct bank recapitalisation instrument will also start in September so that the ESM could, following a regular decision, have the possibility to recapitalise banks directly once an effective single supervisory mechanism is established.?
