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Loans in the red turn out to be the biggest obstacle to the tranche payment

23 October 2015 / 17:10:01  GRReporter
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Contrary to the statements of the Greek government that the first tranche of financial aid from the third rescue programme will be paid next week, the response of creditors indicates the opposite.

The Greek daily Kathimerini quotes an EU official according to whom the amount of 2 billion euro will not be paid next week. The paper refers to sources who claim that the Euroworking Group meeting that was cancelled on Wednesday will take place at the end of the week but it is due to discuss only the progress of Athens in the implementation of the first package of budgetary measures.

The tranche payment will be scheduled for next week only if it is established that Greece has implemented the 49 measures adopted. However, even if the Greek government fails to handle their application by this coming Tuesday, it would be highly unlikely that the preliminary report of creditor representatives be completed by Thursday, reads the newspaper.

It states that seemingly Berlin considers the positive result of this preliminary monitoring a prerequisite for the recapitalisation of Greek banks. And if it does not take place by the end of the year because of the delay, then the new legislation has to be applied, which provides for haircutting shareholders' money and deposits exceeding 100,000 euro. Such a development would inflict a serious blow to the Greek economy, as the majority of deposit holders of higher amounts are mostly small and medium-sized companies.

In view of this likelihood, the European Central Bank and its governor Mario Draghi insist on separating the completion of the monitoring from bank recapitalisation, if it cannot be completed by the end of the year. However, Berlin argues that even in the presence of a negative development such as deposit haircut, the value of loans to Greece will be smaller, which will facilitate the voting on the resolution in the Bundestag.

The situation is further complicated by the fact that many Member States strongly support the view that the IMF should continue to be involved in the creditor quartet, mainly to monitor the compliance with the rescue programme. The prerequisites for its participation, however, include the implementation of more reforms and debt relief. German officials indicate that the debt issue has not yet been formally discussed, emphasizing that there can be no concessions regarding the payment dates or interest rate reductions.

Berlin and Brussels expect Athens to take up a serious position and deal with bank recapitalisation. They are waiting to see the measures that the Greek government will take regarding the bank loans in the red and what will happen with bank managements, being concerned over the probability of the government of SYRIZA and Independent Greeks appointing people from their environment.

The fact that non-performing loans are the main "thorn" in the negotiations became clear from today's statements of the Greek Prime Minister after his meeting with French President Francois Hollande. Alexis Tsipras said, "I would like to emphasize that the transformation of Greek society into an arena of confiscation of the main homes of households cannot be accepted by the people who share the solidarity values in Europe."

According to his assessment, the Greek government will implement all the budgetary measures by the end of November and bank recapitalisation by the end of 2015 in order to be able to start the negotiations on debt. Tsipras did not fail to note that the commitments apply to all countries and to hint at the direction of Germany and other circles in Europe, saying that "some still want Greece's exit from the euro zone."

On the issue of loans in the red, he managed to obtain political support from the French President. Francois Hollande said that "the loan issue is a new threat to Greek households (...) We need to revise the limit under which houses could not be confiscated. We discussed the matter. It requires decisions taken mostly by the Eurogroup and discussions conducted among the leaders in Europe."

As for the settlement of the Greek sovereign debt, Francois Hollande reiterated that the discussion on this will begin after Athens starts to implement the reforms agreed in July.

During his ensuing speech to the Greek parliament, the French President defined the coming weeks as "decisive" for Greece, stressing that compliance with commitments is crucial. Hollande assured Tsipras and the lawmakers that his country will support Greece in implementing the required reforms and in addressing the refugee problem.

Tags: PoliticsAlexis TsiprasFrancois HollandeLoans in the redRecapitalisation of Greek banks2 billion euro trancheImplementation of reforms
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