Europe Puts Pressure on Greece to Meet Budget Targets

The New York Times

By DAVID JOLLYJAN. 27, 2014

BRUSSELS — European officials sought on Monday to keep the pressure on Greece to honor its previously agreed spending and privatization targets as they wrestled with the need to help Athens bridge a funding gap that could reach €15 billion over the next two years.

A review of the Greek government’s finances by the so-called troika of international lenders “is taking too long,” Jeroen Dijsselbloem, the Dutch finance minister who acts as chairman of the Eurogroup of euro zone finance ministers, said before the group’s monthly meeting. “It’s been going on since September-October, and I think it’s in the joint interest of us and the Greek government to finalize it as soon as possible.”

Greece has already received two bailouts and is staring at a shortfall of €4 billion, or $5.5 billion, this year. A third bailout, estimated at €7 billion to €11 billion, will very likely be necessary next year, economists say. A team of inspectors from the troika — the European Central Bank, European Commission and the International Monetary Fund — is waiting for Athens to show progress on its commitments before lenders decide whether to release more money.

Wolfgang Schäuble, the German finance minister, said earlier Monday that he had seen data from the Greek government and was confident that a successful outcome would be reached. But at a news conference after the meeting of euro zone officials, Mr. Dijsselbloem suggested that Greek officials and the troika inspectors were at a virtual impasse.

“We’ve made it quite clear that we’re not going to come back to it until there is a final positive conclusion to the review,” Mr. Dijsselbloem said.

Mujtaba Rahman, the director for Europe at the Eurasia Group, a consulting firm that evaluates political crisis, said that Greece was “slipping on all of its fiscal and structural targets.”

For the first time since the Greek crisis began, the government has reached a primary budget surplus — before interest payments — and “that makes the government believe that it can act more autonomously,” Mr. Rahman said.

The 2014 spending gap, which resulted when the European Central Bank decided that its mandate would not allow it to roll over its funding for Greek bonds could be covered with money earmarked for recapitalizing weak banks, an idea supported by several euro zone governments. But those funds may well be needed for their original purpose, because the E.C.B. is carrying out a careful study of banks’ financial situation this year, and there is concern that these “stress tests” could reveal a need for new capital among some lenders.

Regardless of how Europe manages to finesse it, Mr. Rahman said, “The Greeks don’t believe the E.U. will let them default on a debt to the European Central Bank.”

In a bit of awkward timing, Greece currently holds the presidency of the European Union, a largely ceremonial role that rotates among the Union’s members every six months. Drumming up support among Greece’s partners for additional aid will be tricky as long the country falls short of the goals it has agreed to.

But officials in Brussels are also conscious that elections for the European Parliament are nearing, and that Greece’s fragile government has only limited room to maneuver in the face of strong opposition to the austerity measures that have contributed to high unemployment and a contraction of more than 25 percent in the size of the country’s economy since the crisis began.