Eurozone finance ministers in the Eurogroup will discuss a Greek application for a new conditional loan package on a conference call on Wednesday, EU officials said, although they may not take a decision until after Sunday's planned referendum.
Two letters from Prime Minister Alexis Tsipras to creditors on Tuesday came too late to secure an extension to the previous bailout which expired at midnight (2200 GMT), just as Greece defaulted on a 1.6 billion-euro debt repayment to the IMF.
Tsipras's request for a third bailout package for two years could trigger the following process:
– Eurogroup, which next meets by conference call at 1530, could agree that Greece is in need of financial assistance – not a major doubt given that it is effectively bankrupt and has lost access to financial markets. However, ministers may delay any decision until after the vote on bailout terms.
– Once Eurogroup President Jeroen Dijsselbloem, in his role as chair of the board of governors of the European Stability Mechanism (ESM), accepts the application, he asks the European Commission, the EU's executive arm, along with the European Central Bank (ECB) to assess it.
– The assessment can be lengthy but in this case Commission and ECB officials have already spent months working intensively with the new Greek government to seek a deal to complete the previous bailout. Capital controls imposed this week ahead of the default complicate the economic health check but officials see no difficulty in producing a quick review of Greece's needs.
– Tsipras asked for an ESM loan only to meet debt service obligations to 2017 which he put at about 30 billion euros.
– If the Eurogroup decides to accept Greece's loan request, it will ask the Commission, the ECB and, probably, the IMF, which has been involved in the past two bailouts, to negotiate a Memorandum of Understanding (MOU) detailing conditions Greece must accept. Such conditions have been a bone of contention.
– Tsipras has indicated he is now ready to accept the terms he rejected late last week, with some exceptions. Eurozone sources said on Wednesday those exceptions could hold up an agreement. However, in principle an accord appears within reach.
– German Chancellor Angela Merkel has said negotiations with Greece cannot start until after the referendum in which Tsipras has called on voters to reject the conditions offered a week ago to complete a bailout that has since expired. EU and Greek officials say the dialogue can resume whatever the result, although it may change the political climate of any talks.
– If Greece and the Eurogroup agree terms, the countries of the eurozone must approve lending which would be guaranteed by their own treasuries. In some cases, notably in Germany, this would mean a parliamentary vote. Summer recesses for many legislatures may be a hurdle. However, EU officials have said the process can take a week but could go more quickly.
– If both sides are willing to come to terms, the whole process could be completed within three weeks, EU officials say
– in time for a crucial repayment to the ECB on July 20. If Athens missed that bond redeption, it could put an end to ECB emergency liquidity to keep Greek banks afloat.