European Commission President Jean-Claude Juncker answers questions during an interview with AFP in Brussels yesterday. “All the reports I am getting suggest an accord this month, preferably before the 20th,” Juncker said about a deal between Greece and creditors on a new rescue plan worth up to €86bn.

AFP/Brussels


European Commission head Jean-Claude Juncker believes an agreement on a third bailout for Greece is likely this month, hopefully by August 20 when Athens must make a key debt repayment.
“All the reports I am getting suggest an accord this month, preferably before the 20th,” when Greece must repay some €3.4bn ($3.7bn) due to the European Central Bank, Juncker told AFP in an interview yesterday.
Officials from the Commission, the ECB, the EU’s bailout fund and the International Monetary Fund are currently in Athens working out the details of the new rescue worth up to €86bn.
The Greek government said on Tuesday it expected an agreement by August 18.
The negotiations in Athens, which took some time to organise, are now making “satisfactory” progress, Juncker said.
He said if an agreement is not reached, “then we will have to arrange another round of bridge financing” similar to July, when Juncker scraped together an emergency loan of €7.0bn so Athens could pay the ECB and make up arrears due to the IMF.
After two bailouts costing €240bn plus a private sector debt writedown of more than €100bn, the IMF has been pressing its European partners hard to reduce Greece’s debt mountain of more than €320bn.
Greek debt is not sustainable, the IMF argues, and another bailout must allow for some reduction if the economy is ever to get back on track after six years of recession and austerity.
Juncker however played down any differences with the Washington-based fund, saying: “I think people exaggerate a bit ... the IMF is there in Athens and the understanding between the institutions is very good.”
Germany in particular has taken a hard line on Greece, warning against any debt reduction before Athens implements more tough austerity measures and even then not offering much leeway.
At the July 12-13 Brussels summit of eurozone leaders which agreed to talks on a third bailout, Berlin even raised the possibility of Greece taking “time out” from the single currency.
The proposition was discussed but then dropped.
Juncker said he had “always excluded” a Greek eurozone exit, or Grexit, even if the Commission had drawn up plans for such an eventuality as a matter of caution.
“That does not mean I wanted it, not at all, I did everything to avoid it,” the former Luxembourg premier who took over as Commission president in November, said.
“If we had kicked out the weakest country, the financial markets would have soon sniffed out the next weakest (and turned on it) ... I have never met anyone who could, in detail, properly explain to me what the real consequences of a Grexit would be.”  Juncker said the Greek crisis highlighted the importance of European solidarity and strengthening the euro, citing a report drawn up by him with EU President Donald Tusk, European Parliament head Martin Schulz, Mario Draghi of the ECB and Jeroen Dijsselbloem who chairs the group of 19 eurozone finance ministers.
The ‘Five Presidents’ Report’ makes a series of recommendations on increasing the economic and political integration of the eurozone so as to bolster the single currency.  “I can only press eurozone member states to think continually of how to deepen economic governance (of the bloc). The lesson to be drawn from Greece is not to give up but to get down to business!” Juncker said.
At the same time, Juncker said he was anxious to minimise the divide between euro and non-euro states, especially with Britain.
Prime Minister David Cameron plans an “in-or-out” referendum on British EU membership by 2017, after talks with Brussels on returning some powers to London.  “The Commission is working on a fair deal with Britain,” Juncker said.
“We will reach an agreement because the British people always show themselves to be pragmatic when it comes to the essentials.”

Athens, lenders see need for bank recapitalisation by year-end

Greece and its international lenders want the country’s struggling banks to be recapitalised by the end of the year, Greece’s finance minister said yesterday, a move that would avoid new rules forcing large depositors to pay for some of it.
Finance Minister Euclid Tsakalotos said that both sides discussing a new bailout for Greece were on the same page regarding the speed needed for recapitalisation.
“We discussed the recapitalisation issue of Greek banks. They (creditors) want, as do we, to complete the process soon ... by the end of the year,” he told reporters after a meeting with representatives of the European Union and the International Monetary Fund.
The EU estimates that the Greek banking sector will need anything from €10bn to €25bn, but the exact amount needed would depend on the results of stress tests and asset-quality reviews.
Greek banks have seen billions of euros flow out of accounts this year as the potential for Greece being thrown out of the eurozone grew. Capital controls were imposed to stop the flow.
Shares in the country’s listed banks have crashed since the stock market opened on Monday after a five week shut down as part of the capital controls.
The bank sector index has lost 63% in the three sessions since Monday.
Part of the reason is concern about recapitalisation, which will mean that existing shareholders will see their holdings diluted.  The stress tests and asset reviews may take some time, but the negotiators are keen to get it done by the end of the year when so-called bail-in rules kick in.
These would mean that large depositors, including companies, would lose money as part of the recapitalisation programme, taking a haircut or charge.
“They (the creditors) also agree that there must not be a haircut on bank deposits,” Tsakalotos said.
One of the biggest losers in the bank-stock rout, meanwhile, may have been the Hellenic Financial Stability Fund, which pumped €25bn into Greek banks in exchange for shares in 2013, becoming their major shareholder.
It has no remaining fund to plug capital shortfalls as its remaining cushion of €10.9bn was returned to the European Financial Stability Facility earlier this year.