The Guardian — Germany has urged Greece and its creditors to put quality before speed as negotiators in Athens strive to finalise a bailout worth up to €86bn (£61bn).
A finance ministry spokesman in Berlin said the government would scrutinise any agreement, which must also be voted through by the Bundestag, but cautioned against rushing a deal. Greece and its lenders are seeking an accord by 20 August, when the country must make a payment of €3.2bn to the European Central Bank (ECB).
“We are ready to do this examination quickly this week if necessary, but quality comes before speed,” said the spokesman, who added that there must be “strict conditionality” for financial help. “It is sensible – that is our belief – to fix the size of the first payment tranche to the extent of the reforms implemented,” he said.
The comments came as the European commission – one of four negotiators alongside the ECB, the International Monetary Fund (IMF) and the European Stability Mechanism (ESM) bailout fund – said the teams in Athens had been working day and night through the weekend to reach an outline deal.
Following last month’s dramatic summit in Brussels that took Greece to the brink of being turfed out of the euro, the leftwing government of Alexis Tsipras is said to be negotiating seriously and constructively with officials representing its creditors.
Both sides wrangled nonstop through the weekend in Athens and resumed negotiations after midnight on Monday in the hope of finalising arrangements by the deadline.
“Progress has indeed been made,” said a European commission spokeswoman. “A deal can be realised in the month of August, preferably by 20 August.”
While the commission in Brussels is talking up the prospects of an agreement by the deadline, and the Tsipras government even talks optimistically of wrapping up a deal by Tuesday, the German finance ministry is playing down the chances of a quick breakthrough. It is making the argument that rigour should trump haste every time. The ministry spokesman added on Monday that if funding cannot be released from the ESM by 20 August, a short-term bridging loan should be considered.
The negotiations are focused on the terms of what is known as a memorandum of understanding, the bailout conditions, and on what Athens has to deliver up front, known as prior actions, to secure the financial lifeline.
Parliaments, notably in Athens and Berlin, are certain to be recalled from their summer recess to facilitate the agreements since the Tsipras government has to pass endorsing legislation and reform bills to gain access to the funds, while German MPs will have to agree to the terms of the new bailout.
Senior officials in Brussels predict that the level of the third Greek bailout in five years will ultimately run to €100bn. But northern EU creditor governments sceptical about the chances of the latest rescue attempt want to keep the bill below €86bn, the figure agreed at the overnight eurozone summit in Brussels in July. The IMF has also ruled out backing a new bailout unless there is an explicit agreement on debt relief for Greece.
For Tsipras and his radical leftist Syriza movement, the symbolism and the framework of the negotiations represent a major climbdown. Tsipras for months had claimed that the hated memorandum was dead, that the so-called troika of the three main creditor bodies had been dissolved.
Until 20 July, bad-tempered negotiations had taken place in Brussels rather than Athens, where representatives of the creditors were denied access to government buildings, ledgers and databases.
All of this has been reversed following last month’s summit. The most controversial part of the negotiations concerns a €50bn privatisation fund, insisted upon by Germany and whose notional proceeds are to service debt and supply loan collateral.
Tsipras fought tooth and nail against the idea at the July summit, and the standoff between him and Germany’s chancellor Angela Merkel brought them to the edge of a collapse in negotiations and a probable Greek exit from the single currency.
The Dutch and the Portuguese crafted a last-minute compromise earmarking a quarter of the privatisation proceeds for reinvestment in Greece. While Tsipras bitterly resisted the German demand at the time, his government now likens the instrument to the kind of sovereign wealth funds operated by Norway and others.
“Essentially, it is a state investment fund quite similar to those that have been created by several states around the globe – Norway, Australia, etc,” said a Greek government statement.
The scale of the problems plaguing a new deal was reinforced on Monday by the disclosure that the Greek economy is expected to shrink by up to a further 2.3% this year, following five years of recession that only started to lift last year.
The worsening slump is being blamed on Tsipras’ chaotic first six months in office. But the grim figures will make it harder for both sides to agree on a key metric for the new deal: the primary budget surplus. This sets the level at which government revenue exceeds spending, after debt servicing costs have been stripped out.