The new Greek rescue plan approved by the Eurogroup – The World

Christophe Garach (Brussels – Correspondence)

A good dose of hope, a billion packet and a zest afterthoughts: after an umpteenth marathon Eurogroup finally reached, Friday, August 14, to validate a third plan of aid to Greece. Hopefully, this time it is “good” , exclaimed Michel Sapin, Minister of Finance. Sign that the consensus was not too painful for Berlin, Wolfgang Schäuble the inflexible German Minister expressed also satisfied with the result before adding however that he had “remain cautious because, of course, we have provided a huge amount of money “.

In total, the amount of ” European solidarity “ should not exceed 86 billion euros (25 billion will be used as a “buffer” to help the Greek banks if needed). For now, this aid will be financed by the Europeans alone without the support of the International Monetary Fund, which will make its decision in October. This new financial assistance program is supposed to help Greece to get its head above water after two months of intense turmoil that plunged its economy to the lowest: the Commission now expects a recession of up to 2.5 % in 2015, says its vice president Valdis Dombrovskis

Read the story. Six years of crisis in Greece, austerity nine shots, three shots help …

Distrust still required

Even if all the protagonists explained that the return of confidence – especially Greek side – had contributed greatly to finalizing the agreement, mistrust remains appropriate and disbursement of 86 billion will be in the dropper by 2018. On the eve of probable early elections in Greece, the Eurogroup hawks maintain pressure on Alexis Tsipras, the Greek Prime Minister radical left.

So, from Thursday, August 20, when the national parliaments have yet to decide who will be endorsed, and as soon as the Governing Council of the European Stability Mechanism (ESM) to oversee the ‘aid to Greece has issued its authorization, a first tranche will be paid. On paper, twenty-six billion euros are planned. Ten will be allocated for the recapitalization of Greek banks but those billions will remain in the hands of the MES that the valves open only under conditions. Rest sixteen billion euros: in the end, only thirteen are actually disbursed to enable Greece to honor the repayment of its current liabilities (of which 3.4 billion is to be paid to the ECB to August 20) <. / p>

Read also our analysis: The agreement with Greece to test policy

As for the last three billion, they will be released only later, probably in September or in October, with no guarantee of schedule. As most of the program, everything will depend on the effective implementation of the wide range of reforms that Greece is committed to implement with the prior agreement of its creditors.

An agenda reforms judged “ambitious” by Jeroen Dijsselbloem, the president of the Eurogroup. But the adjective remains below reality: the Memorandum of Understanding that Greece has negotiated with its creditors to obtain this windfall will force to start an unfathomable transformation process in just three years with the key: budget cuts a hunting tax evasion, a forced march to liberalize its economy, a reorganization of its social organization, privatization of large segments of its public sector and deemed disproportionate failed …

still debt “unsustainable” for the IMF

Michel Sapin evokes a plan reforms that will impact deeply the whole of Greek society. Whether the efforts required will be considerable, head of Bercy however considers that these will be “very balanced” and that this plan is still “for success” because everything was done to avoid the mistakes of the first two bailouts. It is true that an investment program must also accompany this transformation and that Athens will also rely on tens of billions of euros drawn directly into the budget of the European Union.

These billions directly benefit the Hellenic economy promise the Eurogroup President and CEO of MES. The new Greek finance minister Euclid Tsakalatos him, fingers crossed. “We hope it will help Greece to move forward” and “it will depend on how the Greek society will react” , has he specified in out of this meeting

As for the consequences of this new rescue plan on Greek debt -. which could reach almost 200% of GDP before long – the IMF remained focused on the Eurogroup meeting. Despite the analysis provided by the European Commission, the Executive Director Christine Lagarde IMF stressed that it remained convinced that the Greek debt was “unsustainable” and that restructuring was necessary and complementary.

On 13 July, the Heads of State and Government discussed this hypothesis. But this promise is still improbable given the hostility of Berlin. With a certainty: a discount of debt is already excluded it. The issue will come back anyway in October on the table of finance ministers

Read also our explanations. Everything about the agreement reached between Greece and its creditors

Christophe Garach (Brussels – Correspondence)