BRUSSELS – Greek Prime Minister Antonis Samaras got support from the heads of the Eurozone for his plan to break away from what’s left of two bailouts from international lenders, but only with a precautionary credit line and a tight leash in case his government has trouble borrowing from the markets.
The head of the Eurogroup, Jeroen Dijsselbloem, said that Eurozone finance ministers are behind the idea of providing Greece with the financial support that would allow it to exit its bailout at the end of the year without requiring further funding from the International Monetary Fund.
“There is strong support for a precautionary credit line in the form of an existing European Stability Mechanism tool called the ECCL – Enhanced Conditions Credit Line – and that is the path we will now further pursue and work on the conditions that will go with that,” Dijsselbloem told a news conference.
“There is also a broad understanding the IMF needs to continue being involved and a further discussion will have to take place on the exact form of this involvement,” the Eurogroup chief said after the ministers met in Brussels.
Dijsselbloem also said the IMF, should have a role in the future Greek program. Follow-up support would be financed by the European Stability Mechanism, or ESM, the euro area’s permanent rescue fund.
“Taking into account the still-fragile market sentiment and the many reform challenges still lying ahead, there is strong support for a precautionary credit line in a form of an existing ESM tool called the ECCL, an Enhanced-Conditions Credit Line,” Dijsselbloem said. “There’s also a broad understanding that the IMF needs to continue being involved,” Bloomberg reported.
According to Reuters, three options to help Greece exit its bailout at the end of the year were discussed, all focusing on the use of some 11.5 billion euros in bank recapitalization funds remaining with the Hellenic Financial Stability Facility (HFSF) that was supposed to go to helping troubled banks.
The money is from what’s left of 240 billion euros ($306 billion) in two rescue packages from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that began in 2010. Most of the funding rns out this year but Greece is scheduled to keep getting money from the IMF until 2016, the year of the next scheduled national elections.
But the bailouts have come with harsh austerity measures driving down support for Samaras’ coalition of his New Democracy Conservatives and its partner the PASOK Socialists and he’s eager to get out from under the deal with the major opposition Coalition of the Radical Left (SYRIZA) trying to block the February, 2015 Parliamentary election of a Greek President to force early polls.
In the first option, the recapitalization money would be returned and Greece would instead apply for an ECCL from the ESM. This would mean signing a new memorandum of understanding, which the government wants to avoid at all costs.
Under the second scenario, the bank recapitalization money could be used for Greek debt servicing and turned into a financial buffer. The 11.5 billion euros is a fraction of the country’s staggering 370 billion euros debt.
The third option is to extend the current bailout by six to 15 months. That would give Greece more time to meet the criteria for the release of the last, 1.8-billion-euro, tranche of the existing program, which will be lost unless it is disbursed before the end of the year, but also technically mean Samaras would lose his early exit and stay tethered to the Troika.
Eurozone finance ministers would then agree that the 11.5 billion euros could be put to a different use after it is returned to Greece’s lenders at the end of the year under a one-year extension of the bailout.
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