Position paper says bank recapitalization is a hidden bailout - RTRS
- A position paper from the German government says the Greek bank recapitalization money (10.9B euros) should be rejected
- They say it's a Trojan Horse to replace the current bailout with bridge financing
- They note that Greek banks passed the stress test
- The Greek letter released today falls short of clear freeze of new Greek measures, no sense drafting Eurogroup statement Friday
The final part sounds like they're hoping to reject the bailout extension, at least as it stands.
Update from RTRS:
German officials described a Greek request to extend Athens' bailout programme on Thursday as a "Trojan Horse" that left "immense room for interpretation" and gave no clear commitment that Greece would meet the terms on its current loans.
According to a draft of a German position paper prepared for a meeting of euro zone officials in Brussels, Germany believed the Greek letter gave no grounds for starting to draft a common statement at a meeting of Eurogroup finance ministers on Friday.
The draft, reviewed by Reuters, also recommended that there be no prolongation of 10.9 billion euros of credit earmarked for the recapitalisation of Greek banks, since the Greek banks have successfully passed the stress test last year
It's clear to me that the Germans are angling to grandstand on Friday and attempt to reject a bailout extension. They could back down at the final minute but there doesn't seem to be much trust here. The headlines coming out of Reuters weren't exactly the clearest representation of the story but the main headline here should be: Germany recommends rejecting Greek bailout extension -- that's the kind of headline that should hurt the euro.
Update 2:
The full text of the German response is in the Greek press:
German comments on the Greek application
The Greek letter is not clear at all, but opens immense room for interpretation. To mention the 3 most important points: It includes no clear commitment to successfully conclude the current programme and its falls short of a clear freeze of Greek measures. It is totally unclear how the Greek government wants to pay its bills over the coming weeks with the current short fall in tax receipts.
This is why the letter is not in line with the last Eurogroup position. It rather represents a Trojan horse, intending to get bridge financing and in substance putting an end to the current programme. On this basis it makes no sense to start drafting a Eurogroup statement on Friday. We should aim at three things now:
First, the three institutions should carefully examine the Greek current fiscal position in relation to the letter and give us their advice, as agreed in the last Eurogroup, whether on the basis of the Greek letter a successful conclusion of the current programme would be possible, with a sufficient primary surplus and debt sustainability to be assured.
Second, we need a clear and convincing commitment by Greece, which may just contain 3 short and well understandable sentences: "We apply for the extension of the current programme, making use of built-in flexibility. We will agree with the institutions any changes in measures from the existing MoU. And we aim at successfully concluding the programme".
Third, Greece has to publicly confirm that it will refrain from unilateral national measures to roll back the current programme. The authorities will with immediate effect not take any initiative or implement any measure or policy which is inconsistent with existing commitments under the current programme or aggravate the fiscal situation. This includes refraining from announced labour market and social reforms to be voted in Parliament this week.
The 10.9 bn Euro, earmarked for banking recapitalization, should not be prolonged since the Greek banks have successfully passed the stress test last year.
h/t @yanniKouts
