Greek bailout renegotiation faces setback
By Sarah Collins | Monday 25 June 2012
A troika of Commission, European Central Bank and International Monetary Fund officials will not go to Greece now to monitor implementation of the country’s commitments under its second bailout programme after the newly elected Prime Minister, Antonis Samaras, and Finance Minister Vassilis Rapanos fell ill over the weekend. The troika was due to arrive on 25 June to begin talks on putting Greece’s bailout back on track, after reforms stalled following the inconclusive 6 May elections.
A spokesman for Economic and Monetary Affairs Commissioner Olli Rehn said, on 25 June, that the EU’s first concern was for the health of the two politicians and that the troika would return to Athens “as soon as possible” - though not “today or early this week as expected”. The Greek government is expected to run out of cash as early as next month, though it will receive a €1 billion portion of its first bailout payment under the second rescue loan this week (the money had been withheld pending the outcome of the elections). “Greece has to face financial obligations and therefore it is important to have this exercise taking place as soon as possible,” Rehn’s spokesman said.
Greece is asking for two extra years to meet a 3% of GDP budget deficit target. Its deficit was over 9% last year.
Meanwhile, Fitch ratings agency has downgraded the credit rating of Cyprus to ‘BB+’ on the back of its banks’ massive exposure to Greece. Fitch says Cypriot banks could now need up to €4 billion in extra cash to guard against further losses. A spokesman for Rehn said, on 25 June, that he was not aware of any request by Cyprus for an EU aid package.