Key dates to watch on Greece as bailout rift cracks open

Published: May 9, 2016 10:14 a.m. ET
Market Watch

Greece faces key ECB repayment in July and still needs to unlock bailout funds

By
SARA SJOLIN MARKETS REPORTER

The seemingly never-ending Greek debt crisis returned to the fore on Monday, with the country trying to secure a fresh tranche of bailout money to keep it financially afloat over the summer.

The Greek parliament over the weekend approved an unpopular package of pension reforms and tax hikes that is seen as taking it one step closer to wrap up the long-delayed first review of its €86 billion bailout program agreed last summer. Concluding the review is key to unlocking bailout funds, which are crucial to repay €2.3 billion ($2.6 billion) to the European Central Bank in July. Greece is also due to pay the International Monetary Fund €300 million in June.



The Eurogroup of eurozone finance ministers meet later on Monday to discuss Greece’s newest austerity package, but no formal approval is expected as the creditors remain deadlocked over the bailout terms.

The biggest problem for Prime Minister Alexis Tsipras is that key creditors — including the IMF — are unlikely to be content with Sunday’s measures alone. The IMF calls for additionally “contingency measures” worth about €3.5 billion in case the bailout goes off course. Greece and the European Commission oppose such demands, according to media reports.

Furthermore, the IMF believes that Europe is trying to make Greece reach an unrealistically high budget surplus. If Europe won’t reduce the target, IMF head Christine Lagarde said in a letter to eurozone finance ministers sent on Thursday, Greece would need to introduce austerity measures worth a further 2% of GDP.

Political observers are hopeful a deal will be reached before the July debt repayment, but the stalemate is already pointing to another Greek drama this summer.

Here are the key days to watch in Greece’s debt debacle.

May 9th, Eurogroup meeting
Eurozone finance ministers gather in Brussels Monday afternoon European time for an extraordinary meeting to discuss two things on Greece: 1) Assess the governments progress in agreeing to and implementing austerity measures to bring the economy back on track. And 2) Talk about the sustainability of Greece’s huge debt burden, which may mean a discussion on some kind of debt relief.

“Both elements need to be in place in order to finalise the programme’s first review and unlock further financial assistance to Greece,” according to the Eurogroup agenda for the meeting.

As those elements aren’t expected to be formally rubber stamped on Monday, the next Eurogroup meeting will be of significant importance.

May 24th, Eurogroup meeting
Between May 9 and May 24, Greece and its creditors are likely to race to reach a deal that will satisfy all sides. The May 24 meeting, also in Brussels, is when analysts are hopeful the bailout review will successfully wrap up and clear the roadblock for the next cash injection.

If no agreement is sealed this day, it could spell trouble for Greece and the eurozone, said Cathal Kennedy, European economist at RBC Capital Markets.

“It’s in both sides’ interests to get [a deal] as far in advance as possible [of the debt repayment] to avoid a rerun of what we saw last year, where the uncertainty and damage to the Greek economy probably had some spillover to the wider euroarea,” he said.

July 20th, ECB repayment
Crunchtime.

Greece is due to pay €2.3 billion to the ECB and will struggle to find the money for it without the bailout cash. Last year, the government defaulted on an IMF loan, seriously raising concerns the country would exit the eurozone.

“The ECB is the hard deadline this year, once we start to get into 2017 we’ll get some more again, but this year it’s the ECB repayment,” Kennedy said.