World Economy

Juncker Expects Greek Debt Accord by August 20

Juncker Expects Greek Debt Accord by August 20Juncker Expects Greek Debt Accord by August 20

European Commission head Jean-Claude Juncker believes an agreement on a third bailout for Greece in return for more tough reforms is likely this month, hopefully by August 20 when Athens must make a key debt repayment.

“All the reports I am getting suggest an accord this month, preferably before the 20th,” when Greece must repay some €3.4 billion ($3.7 billion) due to the European Central Bank, Juncker told AFP in an interview on Wednesday.

Officials from the Commission, the ECB, the EU’s bailout fund and the International Monetary Fund are currently in Athens working out the details of the new rescue worth up to €86 billion.

The Greek government said Tuesday it expected an agreement by August 18.

The negotiations in Athens, which took some time to organize, are now making “satisfactory” progress, Juncker said.

He said if an agreement is not reached, “then we will have to arrange another round of bridge financing” similar to July, when Juncker scraped together an emergency loan of €7.0 billion so Athens could pay the ECB and make up arrears due to the IMF.

After two bailouts costing €240 billion plus a private sector debt write-down of more than €100 billion, the IMF has been pressing its European partners hard to reduce Greece’s debt mountain of more than €320 billion.

 Fresh Damage

Greece’s economy will suffer fresh damage from the austerity measures demanded by its creditors and will remain stuck in permanent depression unless it receives substantial debt relief, one of the UK’s leading think tanks has warned.

The National Institute of Economic and Social Research said the increases in VAT reluctantly accepted by the Syriza-led coalition in Athens in exchange for a new bail out will result in a 1% fall in national output in 2016.

In its quarterly analysis of the state of the global economy, NIESR said that by the time the Greek economy stops contracting in the middle of next year, gross domestic product would be 30% lower than at the start of the crisis in 2010 and 7% lower than when the country joined the single currency in 2001.

The report was published following a second day of heavy selling of bank shares on the Athens stock market. On Monday five shares comprising the banking index–National Bank of Greece, Alpha Bank, Piraeus Bank, Attica Bank and Eurobank–suffered double-digit losses, including three over the 30% limit that triggered an automatic trading suspension. The same group again suffered losses near the 30% level on Tuesday, with trading in Piraeus Bank shares suspended.