Euro Area Urges Tsipras to Meet Bailout Pledges Without Delay 

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  • Funds for recapitalization tied to country meeting conditions
  • Finance ministers tell Tsipras not to ease up on reforms

Greece shouldn’t expect the euro area to relax bailout requirements to meet next month’s deadline for unlocking money to recapitalize its banking system, Dutch Finance Minister Jeroen Dijsselbloem said.

Officials in Athens should successfully navigate the first review of the 86 billion-euro ($97 billion) rescue program before the euro area will release banking funds or consider measures to ease Greece’s debt burden, Dijsselbloem said at the conclusion of a meeting of euro-area finance ministers in Luxembourg. It’s essential for Greek Prime MinisterAlexis Tsipras to move quickly on all the required reforms, including financial-sector governance and an overhaul of its pension reforms, he said.

“I’m not sure whether we can be optimistic,” Dijsselbloem, who led the meeting, told reporters. “You cannot expect European governments to put fresh money into the banks if the governance issues haven’t been sorted out.”

Meeting for the first time since Tsipras’s re-election last month, the region’s finance chiefs warned he must not ease up on the work of overhauling his country’s economy if they’re to approve its next bailout payment.

The euro area is pushing Greece to implement 48 economic fixes by mid-October in order to secure the next 2 billion-euro portion of its financial rescue. Tsipras needs the funds to keep the country afloat as he begins the long march to recovery after becoming the first Greek leader to win the backing of voters after signing a bailout deal.

Fixing Banks

These steps must be completed within weeks for euro-area finance ministers to approve the review at its next meeting on Nov. 9. Otherwise, Greece might not be able to win access to 15 billion euros set aside for bank recapitalization.

Asked if he would be prepared to advance the bank funds if governance reforms were completed while the overall review was delayed, Dijsselbloem declined to comment.

The European Central Bank is currently conducting an asset-quality review and stress test of the country’s four biggest banks. The aid package allocates as much as 25 billion euros for National Bank of Greece SA, Piraeus Bank SA, Eurobank Ergasias SA andAlpha Bank AE. For full access to the bank aid, euro-area finance ministers need to approve the release of 15 billion euros by Nov. 15, so it can join 10 billion euros sitting in a segregated account at the European Stability Mechanism firewall fund.

“A lot of work will have to be done in the coming months, so it’s very important to maintain that strong reform momentum,” Dijsselbloem said. “Maintaining that attitude of reform is crucial to regain trust inside and outside Greece, so crucial for economic recovery.”

Leaving the meeting, Greek Finance Minister Euclid Tsakalotos said he expects Greece to hit the targets by the middle of this month. The euro area will have to agree on a further set of conditions “later in October” for the disbursement of an additional 1 billion euros, Dijsselbloem said.

Tsipras is unveiling a draft budget for 2016 along with his government’s policy plans for its new term in office in a three-day parliamentary debate that began in Athens on Monday.

Greece plans to propose bailout loans extension, lower fixed interest rates during the country’s debt relief talks, Tsipras told lawmakers. The government is aiming to restore liquidity and access markets during what he described as the next “crucial” 20 months.

Greece’s two-year notes have stabilized since Tsipras’s Sept. 20 election victory, with yields little changed at about 10 percent after breaching 30 percent in June at the height of the prime minister’s standoff with the country’s creditors.

Striking a bailout deal in July wasn't enough to convince equity investors
Striking a bailout deal in July wasn’t enough to convince equity investors

The International Monetary Fund representative at the meeting was more skeptical than the finance ministers about the Greek government’s ability to fulfill the conditions, according to a Greek official who spoke to reporters in Luxembourg on condition of anonymity.

Monday’s meeting was all about “taking the temperature of the new government,” French Finance Minister Michel Sapin said in an interview. “We want to see its determination to meet commitments under the July agreement and within the right time frame.”

Source: Bloomberg – Euro Area Urges Tsipras to Meet Bailout Pledges Without Delay

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