Greece open to credit line from its lenders

Greece open to credit line from its lenders

 

By Lefteris Yallouros – Athens

In a clear attempt to reassure Greece’s international lenders and bond markets alike, the country’s government has changed its rhetoric (and strategy) on how it plans to exit the EU & IMF – sponsored bailout deal.

Amid a global market sell-off, Greece saw its borrowing rates soar. Effectively, the country was yet again unable to fund itself through bond market over the last week.

Strategy

Prime Minister Antonis Samaras made the “u-turn” clear speaking to reporters in Milan last week where he attended the Asia-Europe Meeting. The PM said the credit line was “an item of negotiation” but did not clarify whether it would come from eurozone counterparts or the International Monetary Fund. Sources reveal the most probable scenario involves the European Stability Mechanism providing Greece with the necessary credit line.

“It has been clear from Greece’s side that we don’t need a new bailout” Samaras added.

SupportThe European Commission will work with Greece to ensure there is a smooth evolution of support for the country after its current bailout program ends at the end of this year, the Commission’s spokesman Simon O’Connor said last week.

“Europe will continue to assist Greece in whatever way is necessary,” O’Connor told a news briefing. “We will work to ensure a smooth evolution of support for Greece after the end of the current program,” he added.

Conditions

Should Greece clinch a deal with creditors on the credit line it won’t come without certain conditions. The country’s finances will remain under scrutiny and a fresh memorandum will also be signed containing mostly structural reforms as opposed to harsh fiscal measures.

In any case, the upheaval surrounding the economy after the three day sell-off last week signified the return of uncertainty and is expected to affect the ongoing evaluation by the troika of progress made in the adjustment program. The government will resume talks with troika officials later this month with less space for “manoeuvre” and more pressure to deliver agreed reforms.

Polls

The government is also being pushed to the wall by recent opinion polls as main opposition SYRIZA surges ahead. The Coalition of the Radical Left (SYRIZA) maintains a lead over conservative New Democracy ranging from 4 to 7,5 percent in recent opinion polls. New Democracy’s coalition partner PASOK is also struggling with most polls giving it more or less 3 percent.

Antonis Samaras will meet with deputy PM Evangelos Venizelos this week to decide the government’s next steps in light of recent developments. Changes to union regulations, evaluating civil servants and policy on mass dismissals are thorny issues for the coalition that will also be discussed.

Uncertainty

Commenting on the spike in interest rates on Greek bonds, Finance Minister Gikas Hardouvelis said “the reasons are not only Greek but also European. Greece is one step before the end of the financial adjustment program and this is a source of uncertainty on what will follow, what will be our relationship with, our up to now, official lenders. This uncertainty was expressed. The market will recover when the reasons for the uncertainty will no longer exist”.

Referring to a potential departure of the IMF from the country, Hardouvelis said that there would be “a change in our relationship. It is not a divorce. The IMF will be there for us but as an observer without a detailed oversight authority.”