EU tells Greece to keep up bailout reforms as coalition falters

Eurozone finance ministers on Thursday warned Greece that it must maintain reform efforts to keep bailout money flowing, even as fears grew that its governing coalition could collapse over the closure of the public broadcaster ERT.

“It is essential to keep up the reform momentum,” the president of the ministers’ Eurogroup panel, Jeroen Dijsselbloem, said after talks in Luxembourg. “I understand that the political situation in Greece is difficult, but I strongly hope that all political leaders will understand the importance of working together.”

“I do hope for the sake of the Greek people that stability will be preserved,” EU Economy Commissioner Olli Rehn added. “I want to appeal to the sense of responsibility of political leaders in Greece. The ball is in the court of the Greek authorities.” Prime Minister Antonis Samaras has been at loggerheads with his coalition partners ever since he unilaterally decided to shut down the broadcaster in a bid to meet savings requirements imposed as part of the country’s international bailout.

The two sides held the third round of crisis talks in four days on Thursday, but they still disagree on what should happen to ERT and its employees.

“We could not find common ground,” said the Democratic Left leader Fotis Kouvelis.

“The situation is dramatic,” PASOK party leader Evangelos Venizelos added in a television interview.

Talks at different levels were expected to continue on Friday.

Scanning Greece’s progress

“Greece has a difficult path to pursue. Greece is going down this path more determinedly than most would have expected a year ago,” German Finance Minister Wolfgang Schaeuble said.

But the rift in the coalition government has raised the possibility of snap elections being called, just one year after the last general election – fueling worries that the country’s international bailout could be destabilized once again.

Athens is already struggling to meet the conditions imposed as part of the two rescue packages it has received, which amounted to more than 200 billion euros (265 billion dollars). This month, a planned privatisation of the national gas company DEPA fell through.

Experts from the European Commission, European Central Bank and International Monetary Fund (IMF) who were reviewing Greece’s reform progress temporarily broke off their mission on Wednesday “to allow completion of technical work.” Their endorsement is needed for Greece to receive the next tranche of its bailout, which is helping it avert bankruptcy. Eurozone finance ministers expect the mission to resume by July 1, said the president of their Eurogroup panel, Jeroen Dijsselbloem.

The IMF indicated on Thursday that “financing problems” could arise if the review is not “concluded by the end of July.” The Financial Times daily reported that a shortfall of about 3 billion euros is threatening the bailout programme because eurozone central banks had not rolled over Greek bonds.

“The priority remains for the Greek authorities to deliver on the programme quickly,” IMF spokesman Gerry Rice said in a statement.

“There is no problem on the premise that we reach a final agreement on the programme in July,” Dijsselbloem added.

The hurdle is only the latest in the challenges that have faced the Greek bailout programme.

“I love Greece, but I’m very much looking forward to a summer where we don’t have any Greek crisis,” Rehn said.

No changes in Cyprus bailout

The eurozone ministers’ talks were also overshadowed by Cyprus, which found no support on Thursday for any changes to its bailout programme.

The island secured the 10-billion-euro ($13-billion) rescue package in April to avert bankruptcy. President Nicos Anastasiades has raised eyebrows by requesting moderations so that the Bank of Cyprus – the country’s largest lender – can be safeguarded.

Ministers agreed unanimously that “the determined implementation of the (bailout) programme is indispensable,” Dijsselbloem said. He had earlier ruled out any more money for the Mediterranean island.

A Cypriot government spokesman told the state broadcaster RIK that his country had only sought a few changes in the bailout to address “some difficulties,” but would stick to the basic agreement.

Also on Thursday, the eurozone ministers gave their blessing for Latvia to adopt the euro. The Baltic country hopes to exchange its lats for euros on January 1. European Union finance ministers and the bloc’s leaders still have to endorse the move.

The ministers additionally agreed on basic rules that will pave the way for the eurozone’s bailout fund to eventually recapitalise troubled banks directly.

The measure is seen as key for the construction of a eurozone banking union, even though it is not expected to be available until at least the middle of next year. There will be a limit of 60 billion euros in funds available for possible recapitalizations.

“It’s hard to overestimate the importance of these steps and the wider efforts to complete the clean-up of our banking system in Europe,” Rehn noted. “We must remove the uncertainty that has been hanging over the banking sector for too long.” “These are fundamental subjects to put the financial crisis that has weighed on Europe since 2008 behind us for good,” French Finance Minister Pierre Moscovici had said earlier.

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