Germany delays Greece’s final bailout payment

EPA/PATRICK SEEGER via Naftemporiki

Bloomberg — Germany held up a final 15 billion-euro aid payment to Greece after the government in Athens postponed a VAT increase, on five islands that have been hit hard by the influx of migrants.  Germany – the only eurozone country not to sanction the Eurogroup agreement disperse the money – decided to hold back the payment until guarantees are made by the Greek government that the postponement is not going to be extended further and that the cost of € 28 million will be found from cuts in other areas of the state budget.

Euro-area finance ministers on Thursday gave the green light for the loans to be disbursed to Greece once lawmakers sign off in Berlin.

Prime Minister Tsipras announced the postponement of the VAT hike less than two weeks ago, following an agreement with Chancellor Merkel to take back failed asylum seekers from Germany,  something that was thought, at the time, to be part of a deal that averted a political crisis in Germany.

The lost revenue at issue is just 28 million euros, but Germany insisted that Greece find savings elsewhere — including its defense budget — to fill the gap, according to an internal memo seen by Bloomberg.

“We all know that the amount is not very big,” said Klaus Regling, who heads the European Stability Mechanism, the euro-area bailout fund. The Greek government has pledged to raise the VAT rate at the end of the year and to compensate for the lost revenue. “That was an important step that hopefully will enable also Germany” to approve the payment, he said.

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Pierre Moscovici, the EU commissioner for economic affairs and taxation, told reporters in Brussels that the delay doesn’t threaten the payment, which will be made “in due time.” Greece will remain under a so-called enhanced surveillance regime, which includes quarterly reviews of its finances.

Delivering on promises to regain economic sovereignty may prove a challenge, as a potential showdown with creditors could complicate Greece’s tenuous access to bond markets. When asked if Greece could renegotiate pension cuts scheduled to kick at the end of the year, Regling said Greece must respect the commitments it made during its bailout program.

Even though Greece won’t escape close surveillance when its bailout expires, its banks won’t benefit from cheap financing lines extended by the European Central Bank. ECB Executive Board member Benoit Coeure reiterated on Thursday that a waiver allowing junk-rated Greek banks to benefit for such funds will be lifted only once the bailout expires.