Finance ministers seek to define support for Greece
Finance ministers of the Eurozone are meeting in Brussels this evening to discuss precise measures to support Greece in case it requires help dealing with its financial difficulties.
Greece is struggling to reduce a huge deficit and uncertainty about its ability to reduce its debts is making it hard for the country to refinance maturing debt on the financial markets.
The Greek government is having to pay an interest rate on its bonds two or three percentage points higher than other members of the eurozone to compensate for the higher perceived risk of default.
Mixture of loans and guarantees
EU officials say that while ministers will not announce the size of a possible bail-out at this stage, or their individual contributions, they are expected to agree to offer Greece a mixture of bilateral loans and financial guarantees if the Greek government needs such assistance.
Both the French and the German finance minister have ruled out agreeing specific aid figures at Monday’s meeting. This position is shared by officials from Spain, which holds the rotating presidency of the Council of Ministers. Officials say that it is too early for such decisions.
According to Spanish officials, it is important to see what impact the Greek government’s austerity measures are having in reducing the budget deficit before any specific decisions are made on an aid package. Officials say, however, that eurozone countries would agree on a broad outline of “co-ordinated actions” in case they were needed.
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But Germany and several other countries are still reluctant to commit themselves to a bail-out plan as they want Greece to implement the measures it has announced, including a pay-rise freeze on civil servants’ salaries and pensions, increasing taxes and doing more to combat tax evasion.
George Papaconstantinou, Greece’s finance minister, will update his counterparts on budget cuts and other austerity measures decided on in a bid to meet a pledge to cut its deficit this year from 12.7% of gross domestic product (the figure for 2009) to 8.7%.
Finance ministers will also make a first assessment of Greece’s progress in improving its public finance based on two progress reports – one drawn up by the Greek government, the other by the European Commission and the European Central Bank.
Tomorrow (16 March), finance ministers from all 27 EU member states will hold their regular meeting.
The agenda will be dominated by discussions on new legislation for the regulation of hedge funds and private equity funds, known as the alternative investment fund managers directive (AIFM). The UK, which is home to around 80% of all hedge funds and private equity funds in the EU, wants to make sure that funds based outside the EU can be sold throughout the 27 member states. Other countries are reluctant to allow funds that are not subject to EU regulation to be sold in their territories. One possible compromise may be to allow funds based outside the EU to be marketed within the single market if they are subject to regulation equivalent to the EU’s rules.
If ministers can reach agreement on the AIFM directive tomorrow, negotiations can start on getting an agreement with the European Parliament. If the differences between the two institutions are not too great, the legislation could be agreed by the end of the Spanish presidency which concludes in June.
Other issues on the finance ministers’ agenda include whether to allow electronic VAT invoicing, financing to help developing countries tackle climate change and the EU growth and competitiveness strategy for 2020.