Greece lumbered toward its next aid payout, possibly broken up into smaller installments and tied to additional economic reforms by Prime Minister Antonis Samaras’s government.
Greece’s “troika” of creditors sealed a staff-level accord on new economic and deficit-reduction steps, leaving open when as much as 8.1 billion euros ($10.4 billion) will be released. Euro-area finance ministers will decide on a portion of that payout in talks that began at 3 p.m. in Brussels today.
“I’m confident that we can take another step forward today,” German Finance Minister Wolfgang Schaeuble said before the meeting. “It will remain a difficult path for Greece.”
European governments led by Germany are continuing to keep Greece on life support, unwilling to let it go bankrupt and exit the euro while doling out aid in the smallest possible doses to avoid upsetting their own taxpayers.
Political tumult in Portugal, among the five euro countries tapping emergency aid, raised the pressure on creditors to keep Greece’s program on track. Germany, the biggest creditor, is seeking to avoid a flareup in the crisis as Chancellor Angela Merkel campaigns for re-election in September.
The euro rose 0.3% to $1.2864 at 3:40 p.m. Brussels time after dropping 1.4% in the previous two sessions. The 17-nation currency may slide if finance ministers don’t approve the next Greek payments tonight, Chris Turner and Tom Levinson of ING Groep NV in London said in client note.
“While important progress continues to be made, policy implementation is behind in some areas,” the troika, comprising the European Commission, International Monetary Fund and European Central Bank, said in a statement.
At issue is whether to transfer Greece’s next payment in one go or, as has been the case since 2012, dribble it out in installments. Creditors may break up the payments again if that is deemed “necessary” and “helpful,” Dutch Finance Minister Jeroen Dijsselbloem, the meeting’s chairman, told reporters.
Austrian Finance Minister Maria Fekter urged a decision tonight to release the aid, saying that “delaying tactics” would be unwise. Dragging out a decision “would yield nothing and make the whole thing more expensive,” she said.
Creditors’ assessment of whether Greece is entitled to the next tranche in 240 billion euros of loans was jolted last month by a government upheaval in Athens, in which Samaras lost one of his two coalition partners in protest of his sudden closure of the ERT state broadcaster.
Samaras handed more prominent ministries to the socialist Pasok party, his New Democracy party’s historic rival, in the ensuing reshuffle. The shrunken coalition has 155 of the 300 seats in parliament, with Pasok’s 28 lawmakers holding the key to legislation.
The troika gave the coalition a lengthy to-do list, including “concrete steps” to control health-care overspending, income and property tax reform, and politically sensitive cuts in government payrolls, termed “mandatory exits” in today’s statement.
Greece has also failed to generate planned revenue from selling state assets. The latest setback came last month, when no bids came in for the national gas company Depa SA.
“The long-term problem is that the fiscal plan for Greece is entirely implausible,” said Fredrik Erixon, head of the European Centre for International Political Economy in Brussels. “There’s a charade going on between the troika and the Greek government and there will be further bumps in the road regarding future bailout payments.”
Finance ministers will touch on other crisis hotspots tonight, at the last scheduled meeting until Sept. 13. Schaeuble and Spanish Economy Minister Luis de Guindos voiced confidence that Portugal’s political disturbances won’t throw its aid program off track.
Prime Minister Pedro Passos Coelho last week brought in a new finance minister and upgraded the governing role of the CDS party, his coalition ally, in order to keep his cabinet together and avoid early elections.
“The situation in Portugal is back on track,” De Guindos said. “The latest agreement they announced will provide stability for a country that is doing all its homework.”
Finance ministers will also examine the state of the economy and banks in Slovenia, which is seeking to escape becoming the sixth country to fall back on international aid.