European Commission head Jean-Claude Juncker believes an agreement on a third bailout for Greece is likely this month, hopefully by August 20 when Athens must make a key debt repayment.
“All the reports I am getting suggest an accord this month, preferably before the 20th,” when Greece must repay some 3.4 billion euros ($3.7 billion) due to the European Central Bank, Juncker told AFP in an interview on Wednesday.
Officials from the Commission, the ECB, the EUs bailout fund and the International Monetary Fund are currently in Athens working out the details of the new rescue worth up to 86 billion euros.
The Greek government said Tuesday it expected an agreement by August 18.
The negotiations in Athens, which took some time to organise, are now making “satisfactory” progress, Juncker said.
He said if an agreement is not reached, “then we will have to arrange another round of bridge financing” similar to July, when Juncker scraped together an emergency loan of 7.0 billion euros so Athens could pay the ECB and make up arrears due to the IMF.
After two bailouts costing 240 billion euros plus a private sector debt writedown of more than 100 billion euros, the IMF has been pressing its European partners hard to reduce Greeces debt mountain of more than 320 billion euros.
Greek debt is not sustainable, the IMF argues, and another bailout must allow for some reduction if the economy is ever to get back on track after six years of recession and austerity.
Juncker however played down any differences with the Washington-based fund, saying: “I think people exaggerate a bit … the IMF is there in Athens and the understanding between the institutions is very good.”
Germany in particular has taken a hard line on Greece, warning against any debt reduction before Athens implements more tough austerity measures and even then not offering much leeway.
At the July 12-13 Brussels summit of eurozone leaders which agreed to talks on a third bailout, Berlin even raised the possibility of Greece taking “time out” from the single currency The proposition was discussed but then dropped.
Juncker said he had “always excluded” a Greek eurozone exit, or Grexit, even if the Commission had drawn up plans for such an eventuality as a matter of caution.
“That does not mean I wanted it, not at all, I did everything to avoid it,” the former Luxembourg premier who took over as Commission president in November, said.
“If we had kicked out the weakest country, the financial markets would have soon sniffed out the next weakest (and turned on it) … I have never met anyone who could, in detail, properly explain to me what the real consequences of a Grexit would be.”
Juncker said the Greek crisis highlighted the importance of European solidarity and strengthening the euro, citing a report drawn up by him with EU President Donald Tusk,
European Parliament head Martin Schulz, Mario Draghi of the ECB and Jeroen Dijsselbloem who chairs the group of 19 eurozone finance ministers.
The 'Five Presidents' Report' makes a series of recommendations on increasing the economic and political integration of the eurozone so as to bolster the single currency.
“I can only press eurozone member states to think continually of how to deepen economic governance (of the bloc). The lesson to be drawn from Greece is not to give up but to get down to business!” Juncker said.
At the same time, Juncker said he was anxious to minimise the divide between euro and non-euro states, especially with Britain.
Prime Minister David Cameron plans an “in-or-out” referendum on British EU membership by 2017, after talks with Brussels on returning some powers to London.
“The Commission is working on a fair deal with Britain,” Juncker said.
“We will reach an agreement because the British people always show themselves to be pragmatic when it comes to the essentials.”