Euro zone finance ministers will consider three options for what happens after Greece exits its bailout at the end of the year, seeking to balance the need to reassure investors with the demands of domestic Greek politics.
The Greek government has staked its survival on exiting the bailout a year earlier, a move that will please voters hammered by austerity measures imposed by the EU and the IMF, but which has already rattled markets, pushing up Greek bond yields.
Finance Minister Gikas Hardouvelis told Reuters he hoped for an interim period of up to a year after exiting the bailout during which Greece will still be get a financial safety net but would no longer be “micro-managed” by lenders.
After two international bailouts totalling 240 billion euros since 2010, when private investors refused to lend to Athens any more, Greece wants to switch back to market financing from the start of next year.
Markets reacted nervously to the plan, worried that Athens would have no longer have any financial back-up. Greek benchmark 10-year bond yields rose to 8.9 percent in late October from 5.6 percent in early September.
Greece and euro zone finance ministers will therefore discuss ways to provide Athens with fall-back financing to boost investor confidence, while addressing domestic political sensitivities.
All three options to be discussed include a financial cushion, using 11 billion euros already granted to recapitalise Greek banks, but which turned out not to be needed, euro zone officials said.
In the first option, the recapitalisation money, now in European Financial Stability Facility bonds, would be returned to the EFSF and Greece would instead apply for and get an Enhanced Conditions Credit Line (ECCL) from the European Stability Mechanism — the successor of the EFSF.
This would allow Greece to say it is not longer under a programme, make it possible for euro zone ministers to increase the size of the credit line above the 11 billion if necessary and set clear conditions for the availability of the money, even if it is not drawn upon.
But obtaining an ECCL would mean Greece has to sign a new “memorandum of understanding”, politically sensitive in Greece where the previous MOU detailed austerity reforms demanded by lenders, resented by Greeks as a loss of sovereignty by Athens.
This option is also relatively lengthy — it would take a minimum of five weeks to complete — and tougher on conditions because the ECCL could be cancelled if Greece fails to meet reform targets and Athens would then have to apply for new, fully-fledged bailout.
