World Economy

EU, IMF Agree New Greek Bailout Request

EU, IMF Agree New Greek Bailout Request
EU, IMF Agree New Greek Bailout Request

European Union and the International Monetary Fund officials have given eurozone governments a positive assessment of Greece's request for a new bailout, a source close to the matter said, making it likely they will agree to open talks on lending Athens tens of billions of additional euros.

Experts from the European Commission, European Central Bank and the IMF spent Friday reviewing the Greek case for aid and proposals for economic reforms from Prime Minister Alexis Tsipras that will be conditions for any loans, Reuters reported.

The positive evaluation, along with a conclusion that Athens currently needs some €74 billion ($82 billion) to meet its obligations, will form a key part of discussions among eurozone finance ministers when they meet in Brussels at 3 p.m. (9.00 a.m. EDT) on Saturday.

With Greek banks shut and subject to capital controls for the past week, failure to agree a new program following five months of abortive negotiations had threatened effectively to force Greece out of the 19-state currency area, alarming EU leaders who have scheduled an emergency summit for Sunday.

One eurozone source, who has been skeptical of the leftist government’s commitment to a new reform program, said it was now “100% certain” the ministers would agree to launch negotiations.

In the meantime, they will also consider short-term aid to tide Athens over until the three-year loan deal that Tsipras requested has been agreed and funds can be disbursed.

Eurozone officials also expect to discuss Greek requests for some of its outstanding debt, currently worth some 175% of its GDP, to be rescheduled, although the creditor governments insist they cannot legally write any off entirely.

Germany, which has contributed more to the previous two Greek bailouts since 2010 than any other country, sounded wary on Friday after Tsipras submitted proposals broadly similar to terms that Greek voters rejected in a referendum last Sunday.

But France, Greece’s strongest supporter among the eurozone’s major powers, rushed to offer praise. President Francois Hollande called the offer of reforms “serious and credible”.

Dutch Finance Minister Jeroen Dijsselbloem, who chairs the Eurogroup of his eurozone peers and also the board of the European Stability Mechanism, which would provide any loans to Greece, described Tsipras’s proposals as a “thorough piece of text” but he declined to go into specifics on Friday.

  Greek Output Slumps

The national statistics agency’s latest figures should put to rest any remaining doubts about how dire the state of the Greek economy is. It’s a stark contrast to Spain and Italy, which showed strong signs of recovery.

The data released by the Athens-based national statistics office, ELSTAT, showed a massive 4% year-on-year slump in May, cutting short a strong three-month run of consecutive growth. It was a glaring contrast to March, when industrial production grew 5.3%, DW reported.

Meanwhile, industrial production for all of last year was down 2.2% compared to 2013. Manufacturing did not fare much better, shrinking 2.7% in May compared to the same month a year earlier, and down from a high of 8.2% in March. Electricity production plunged 7.5%, while mining output suffered a crushing 15% drop. The situation is likely to get worse before it gets better.

Spending has all but ground to a halt as Athens imposed tough capital controls earlier this month to prevent an economic collapse.

Looming over the negotiations are empty state coffers and an economy that officially stumbled back into recession after it shriveled 0.2% in this year’s first three months.

In a further sign of just how hopeless the situation has become for many Greeks, the EU’s statistical office, Eurostat, on Friday reported that the country lost nearly 1% of its population last year.