BRUSSELS: The EU’s huge bailout program for Greece, which is due to end this month, will need to be extended but Athens and Brussels are still at loggerheads over the need for more austerity, a European official said on Wednesday (Thursday in Manila).
“There is an increasing necessity of a technical extension of the program,” said the European source, who spoke on condition of anonymity.
The EU’s involvement in the 240-billion-euro bailout of Greece is set to expire on December 31, three years after concerns about the country’s place in the euro sparked a global crisis that nearly sank the single currency.
Greece, riding a return to growth after six years of recession, had hoped to end the bailout with a clean break, as was the case for rescued Ireland and Portugal.
Athens also proposed to repay the IMF’s remaining loans—which come with tight budgetary regulations—earlier than the 2016 deadline.
But the idea of Greece breaking free of creditor oversight panicked the markets, making a continued link to the so-called “troika” of creditors—the European Union, the International Monetary Fund and the European Central Bank—a necessity.
EU finance ministers last month said that a credit line, to be used only in emergencies, could be an option.
That facility, if approved, would be run by the troika and financed by an existing 1.8 billion euros set aside to recapitalize Greek banks.
But under threat of early elections, the Greek government is resisting a demand by the troika for extra austerity measures in return for the final installment of loans in the current bailout.
The stalemate makes organizing a credit line with Athens before December 31 extremely unlikely as the eurozone’s 18 national parliaments would also have to rubberstamp the deal.
“It is doubtful we can do that in time,” the source said.
To buy time, the EU can instead extend the current bailout agreement which would keep in place the existing tight leash on Athens.
Greek Finance Minister Gikas Hardouvelis said last week this option would be acceptable, if only for “a very short period.”
The EU-Greece feud is over a troika estimate that Athens is short of between two and three billion euros ($2.5-3.7 billion) in its 2015 budget.
Greek Prime Minister Antonis Samaras on Tuesday flatly rejected a demand by the troika to raise sales taxes to meet the shortfall.
The bailout extension would also mean the feud could extend to next year, putting off the final disbursement of 1.8 billion euros owed Greece from the EU.
Greece is also set to receive a total 12.6 billion euros from the IMF through 2016.