European Finance Ministers Discuss Greece
EU finance ministers meeting in Brussels on Monday and Tuesday (15-16 March) are set to discuss a range of different mechanisms to transfer financial aid to Greece, despite continued resistance in a number of EU capitals.
Reports suggest two principle options are being studied: One would see the provision of direct member-state loans to Greece, with the second the enabling of the European Commission to borrow money on international capital markets and then extend loans to Athens.
The EU already has a balance-of-payments facility, under which the commission can raise and lend money to non-eurozone states, with Romania, Latvia, and Hungary all recipients from the facility last year. EU rules prevent the 16 euro area members from receiving funds from the facility however.
Although no figures for a potential Greek bail-out are likely to come forward at this week's finance meetings, agreement on a potential support mechanism would mark a further milestone in EU economic integration.
EU economy commissioner Olli Rehn has signaled that any financial support will be strictly tied to the enforcement of fiscal and structural reforms in the Greece's ailing economy.
The borrowing needs of the country's centre-left administration are estimated at roughly €54 billion for 2010, of which €20 billion will be required for the months of April and May. The government successfully raised €5 billion earlier this month, but only after offering investors attractive rates that Athens is keen not to repeat.
Despite the upcoming discussions, a number of key European states are still reluctant to announce any bail-out plans, hoping instead that sufficient belt-tightening from Athens will be enough to allay market scepticism and bring down the country's borrowing costs.
"There will be no reason to make decisions about financial aid," German finance minister Wolfgang Schaeuble told the Bild Zeitung newspaper on Sunday.
French finance minister Christine Lagarde has also indicated she is against an announcement this week. "I'm certainly not expecting any decision being made, or any button being pressed, or any button being selected to be pressed, because it's totally premature," she told reporters in New York.
The European Commission will present a report on Greece to the EU finance ministers who are expected to endorse the country's recently announced additional austerity measures of €4.8 billion. The emphasis is now likely to switch to implementation.
The Greek parliament is set to vote on new tax legislation by the end of March, as the government seeks to boost its revenues, and legislation to increase the statutory retirement age is set to come the following month.
However, a growing number of strikes and a new forecast suggesting the country's recession this year could be worse than previously anticipated are complicating the government's position, warn analysts.
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