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EU Holds Back Payments for Greece as Key Reforms are Still Pending

tsakalwto_676_450Greece has until the end of the week to resolve the pending issues required for the first review of the bailout program that would unlock further financial aid and funds for bank recapitalization.
“We await the finalization of all the measures in the first set of milestones and the financial sector measures which are essential for a successful recapitalization process,” the ministers said in a document at the end of Monday’s Eurogroup on Greece.
The main disagreement between Greece and creditors is on foreclosures, with the Greek government trying to protect the primary residence. Athens is trying to protect homes worth 180,000 euros or less from auction. Regarding the income of the homeowner, Athens wants to protect household incomes of up to 30,000 euros from auction. Greece’s creditors suggest lower figures in both cases.
The government is trying to protect poorer Greeks from home repossession overall, claiming that the measures required must not disrupt social cohesion and should be more lenient. The Greek side seems optimistic that there would be a fair compromise in the end.
Differences between Athens and Eurozone partners also remain in the number of installments for repaying debts to the state, pricing of generic medicine and value added tax on private education. Greece has until the end of the week to resolve these differences.
“We welcomed the commitment by the Greek authorities that this conditionality will be fulfilled in the course of the week,” the Eurozone ministers said.
Regarding bank recapitalization, stress tests at the end of October showed that Greek banks needed a total of 14.4 billion euros. The European Stability Mechanism has earmarked 10 billion euros for that purpose. The remaining 4.4 billion euros will likely come from private investors.
Eurogroup President Jeroen Dijsselbloem said passing the foreclosures law was key before banks could be recapitalized, because it had a direct impact on the number of bad loans that banks would have to deal with through recapitalization.
ESM President Klaus Regling said that eventually Greece will receive a significantly smaller amount than the 86 billion euros estimated originally. That would have a significant impact on the debt, he said.
Dijsselbloem said that in general there are small and expected delays, but at least on the issue of banks’ recapitalization “we are on schedule.”
Also, the chief Eurozone finance minister said that the privatization fund the Greek government has committed to establish must be legislated soon as it is part of the banking system management.
 

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