As Greece enters the final stretch towards completion of the third bailout memorandum, after the expected approval of the 5.7 billion euro loan tranche on Friday, institutions and creditors appear divided into two camps regarding arrangements in the post bailout memorandum era.
On the one side is the European Commission, whose approach is shared by the Greek government and supported by France, which is in favour of a “clean” exit. That means a permanent return to the markets in summer of 2018, armed with a reform roadmap up to 2021 and a cash buffer of 19 billion euros, which is enough to cover the country’s borrowing needs for the next two years.
Concerns about banks
The other camp is led by the European Central Bank (ECB), which wants Greece to request a precautionary credit line, a tool enshrined in the charter of the European Stability Mechanism (ESM). That line has been supported for months by Bank of Greece Governor Yannis Stournaras, and by main opposition New Democracy, which had been offered that option before the 2015 elections that swept Syriza to power.
The ECB-led camp is concerned about how healthy Greek banks are, and how prepared to contribute to the recovery of the Greek economy and businesses over the coming years.
The key is whether they will require a recapitalisation, which will become apparent in the ECB’s stress tests.
Thomas Wieser, the former head of the EuroWorking Group, is squarely in the ECB camp. “Life would be much easier for Greece if there were a security net, such as a precautionary credit line,” Wieser said on Friday.
Wieser said there may be a compromise under which Greece would take the credit line with certain commitments attached, but far fewer than any of the bailout memorandums.
IMF on the sidelines
The IMF has not yet taken a position in the debate, as it is waiting for the Europeans to decide on debt relief, so that the Fund may in turn decide whether to stay on board with the Greek programme, as an overseer and not a creditor.
All that will take four months to clear up, as the 21 June Eurogroup is expected to unveil the final, definitive debt relief measures, as well as the form of p
