(BRUSSELS) – Eurozone finance minsters will seek agreement Monday on unlocking vital loan aid for Greece, amid pressure to go much further and leverage their rescue funding into a war-chest worth trillions.
The 17 countries that share the debt-challenged euro currency will meet in Luxembourg from 1500 GMT on Monday, with their priority to reach an understanding about whether Greece should get an eight-billion-euro loan, blocked by the IMF for the past month.
International auditors spent the weekend trying to obtain the most accurate, up-to-date picture of Greece’s finances and forecasts, after protests, including staff occupations of ministries, meant a slow resumption of negotiations last week.
The auditors returned to Athens on Thursday, four weeks after an abrupt departure, expressing concerns about spending discrepancies and disappointment at a lack of progress, for instance in privatising state businesses.
European Union economic and monetary affairs commissioner Olli Rehn will give the ministers the inside track on what the Washington-based IMF wants to do, as looming recession risks turning Greece’s crisis into global catastrophe.
There remains the spectre of imminent default, as anticipated by markets treating Greek sovereign bonds as monopoly bets.
Their expectation is that the European Central Bank, soon under new Italian management, will step back in.
Athens is labouring under a crushing 350 billion euros or more of debts, with its stripped-bare economy already on its knees, and the government says it needs the loans to pay salary and other bills this month.
The United States and other major economies are showing growing signs of concern that Europe is too divided to solve the Greek problem or deal with problems in the much bigger Italian economy, and adequately re-capitalise banks that lose heavily in the event of default.
France is one of the most heavily exposed.
Outside Europe, the fear is that a ricochet effect could charge through global financial markets already on a downer as data increasingly points towards renewed recession.
Many want the 440-billion-euro ($590 billion) European Financial Stability Facility’s legal status changed to that of a bank, so it could “leverage” much more firepower.
In other words, based on different rules governing how much is needed in terms of reserves, borrow vast sums to ensure worries over bigger eurozone nations evaporate.
Global pressure is in to resolve the problems before G20 leaders meet in Cannes on November 3-4.
US Treasury Secretary Timothy Geithner has already urged German Finance Minister Wolfgang Schaeuble to put more of Berlin’s financial firepower at the eurozone’s disposal if things worsen.
But Schaeuble said at the weekend that the 211-billion-euro limit set for its exposure will not rise.
“That is it. Finished,” the German minister told the magazine Super-Illu.
The first hill on a difficult horizon is final ratification of an agreement reached by eurozone leaders in July giving the EFSF the scope to intervene when sovereign governments get into cashflow difficulties.
As of Friday, 14 of the 17 eurozone countries had passed legislation the EU wants to be able to trumpet at a summit in Brussels on October 17-18.
The big worry is that Slovakia, which refused to participate in the first Greek bailout last year, might not even vote in time.
Slovakia fears more countries coming back to the EFSF for help if recession deepens. Its coalition government will hold cross-party talks on the issue on Tuesday.