Greece : Divergent positions of European Leaders August 24th , 2012

by Véronique Queffélec on septembre 2, 2012

greece-divergent-positions-of-european-leaders-august-24th-2012

Key Summary

1/Athens asks for more time

During his meeting with Eurogroup chairman Juncker on wednesday 22nd, Greek PM Samaras said that Greece will honour its commitments, will seal an austerity package worth €11.7 billion in coming weeks and has widened its privatization agenda. Juncker acknowledged that Greece has undertaken “tremendous efforts”, but insisted that Greece has to take verifiable and credible fiscal measures to close the funding gap and that this was the country’s “last chance”.

2/ Berlin and Paris have common position in respect to Greece

After their meeting yesterday, German Chancellor Angela Merkel and French President Francois Hollande expressed a common position, stressing they want to keep Greece in the Euro area. However, both of them in their statements highlighted that Greece has to fulfil the MoU requirements and also underlined that the decision about future funding for Greece would be based on the Troika report, which is due at some stage in September. Greek PM Samaras meets Chancellor Merkel in Berlin today and President Hollande tomorrow. There is likely no crucial decision to expect from these meetings.

Key Analysis

1/ Athens asks for more time

In an interview with Süddeutsche Zeitung ahead of the meeting with Angela Merkel on Friday, Greek PM Antonis Samaras personally guaranteed that Germany and all other lenders to Greece would get their money back. In the interview, Samaras said that Greece could bridge a delay in the payout of the next disbursement of the bail-out funding, but warned that “Greece is broke” if it does not get the tranche at all.

Samaras-Juncker Wednesday 22nd

After his meeting with Eurogroup Chairman Jean Claude Juncker yesterday – the first in a round of meetings, to be followed by meetings with German Chancellor Merkel on Friday and French President Hollande on Saturday – Samaras said that Greece will honour its commitments and that it will seal an austerity package worth €11.7 billion in coming weeks and that Greece has widened its privatization agenda. However, Samaras also said that because of the ongoing recession, the country would not be able to stand on its own feet. In respect to Grexit he said that “everyone who bets on Greek euro exit will be disappointed”. While Juncker acknowledged that Greece has undertaken “tremendous efforts”, he insisted that Greece has to take verifiable and credible fiscal measures to close the funding gap. While Juncker was confident that Greece will make the required efforts to receive the next tranche, he stressed that this was the country’s “last chance”. Juncker also said that he is against a third Greek package. Regarding the timing of the Eurogroup decision on the disbursement of the next tranche, he stressed that this would be taken after the publication of the Troika report, which he expects at the end of September.

While Samaras highlights the willingness of Greece to implement more reforms, he stresses the huge negative consequences of ending the programme and refers to the adverse economic situation in order to get more time. Juncker made clear that there is little room in the negotiations with Greece. While there is some chance that Greece will manage to get at least part of the next scheduled disbursement, some experts say that the country will not manage to get funding again in the December round, and therefore continue to expect that Grexit will happen.

2/ Berlin and Paris have common position in respect to Greece

Hollande-Merkel meeting Thursday 23rd

German Chancellor Angela Merkel and French President Francois Hollande stressed in statements last night that they want to keep Greece in the Euro area. However, both of them in their statements highlighted that Greece has to fulfil the MoU requirements and also underlined that the decision about future funding for Greece would be based on the Troika report, which is due at some stage in September.

Berlin remains more reluctant to concessions than Paris.

While the two leaders’ statements leave the door open for Greece to get the next round of funding, German Finance Minister Wolfgang Schäuble made clear that he does not think that the demands of Greek PM Antonis Samaras would work. More time is not a solution to the problems” he said. He added that more time could also mean “more money” and Europe’s help for Greece had already “gone to the limits of what is economically viable”.

According to Reuters, Chancellor Merkel’s Parliamentary leader Kauder told German TV that neither the terms nor the content of the Greek rescue can be renegotiated and that Greek exit from the euro area would not be a problem for the euro. And the Dutch Finance Minister Jan Kees De Jager asked the German government to hold a strict course in respect to Greece fulfilling the MoU requirements.

This meeting highlighted that Greece has very little room to get concessions in terms of easing the existing MoU. However, while there is still a chance that Greece will manage to get some more time, the statements from Germany and yesterday’s comments by Eurogroup chairman Juncker highlight that Grexit looks highly likely.

Upcoming meetings.

Greek PM Samaras’ meeting with Merkel on Friday and Hollande on Saturday. French Finance Minister Pierre Moscovici meets his German colleague Wolfgang Schäuble on Monday (August 27th). And a meeting is scheduled between Italian PM Mario Monti and German Chancellor Angela Merkel on August 29.