By Gabriele Steinhauser, Wall Street Journal
Now that Greece has said it will seek a credit line from the eurozone’s bailout fund once its rescue program runs out at the end of the year, the difficult negotiations on how to make the new aid palatable to both Athens and other European capitals have begun.
The Greek government is looking at early elections next spring if Prime Minister Antonis Samaras fails to find a supermajority (in other words add an extra 25 lawmakers to his 155-delegate-strong coalition) to back a new president by March. That vote for the new president could easily be won by the anti-austerity Syriza party — a situation that both Mr. Samaras and the eurozone want to avoid.
To boost his chances with voters, Mr. Samaras initially announced that he’d seek a “clean exit” from Greece’s bailout program at the end of the year. That would have meant letting the eurozone program run out as planned and foregoing an extra €9 billion from the International Monetary Fund in 2015 and 2016 (assuming that €7 billion scheduled from the IMF for this year is actually paid on time). Some €11 billion in eurozone money still sitting in Greece’s bank-rescue fund would also have to be returned at that point, reducing the country’s debt load by around 6% of gross domestic product.
Mr. Samaras’s plan didn’t go down so well. In mid-October, just as new polls were showing Syriza in the lead, investors started dumping Greek bonds and Mr. Samaras said his country would seek a credit line to ease its return to full market funding.
On Monday and Tuesday, discussions on what such a credit line would look like began among senior officials from eurozone finance ministries. “A clean exit is now off the table,” said one European official familiar with the talks.
And yet, first disagreements are already apparent. Greece doesn’t want to sign another memorandum of understanding, the document that outlines budget cuts and overhauls linked to the aid, or have the IMF involved, according to another official. It also wants the new program branded as a “partnership agreement” focused on growth, rather than on austerity imposed from the outside, the official said.
The view from other eurozone capitals was somewhat different. “Everybody agreed that the IMF should be involved,” said the official, adding that doesn’t mean the Washington-based fund necessarily had to chip in any money. A looser arrangement with the IMF, as was done for the Spanish bailout, where the fund was only monitoring the financial-sector repair, could allow Athens to claim that it was no longer following orders from the “troika” of the European Commission, the European Central Bank and the IMF.
“There are these kind of cosmetics that have to be discussed,” the official said.
However, the guidelines for precautionary credit lines from the European Stability Mechanism do require a memorandum with policy conditions, along with quarterly progress reports to eurozone finance ministers. There were also some questions on whether €11 billion — the amount envisaged by Greek officials to avoid talk of a “new” bailout — would be enough for a convincing credit line, given uncertainty over how much money Athens needs to raise on financial markets next year. “Nobody can say right now,” the official said.
