Quick take: Eurogroup on Greece disappoints: ABN AMRO

Angela Tan
Published Thu, Feb 12, 2015 · 03:06 AM

Euro-region finance ministers failed to agree on how to keep bailout funds flowing to Greece and will resume talks next week.

In its Global Daily Insight, ABN AMRO said the Eurogroup fell short on way forward for Greece.

"Even against the background of low expectations, Wednesday's Eurogroup meeting on Greece was disappointing. The press conference was two hours later than planned. Eurogroup President Jeroen Dijsselbloem then appeared to say that although there was progress, there was not enough to issue a statement with joint conclusions,'' economist Nick Kounis said.

"In addition, there was not even an agreement on the next steps that needed to be taken to prepare for a decision at the Eurogroup on Monday. Talks on the way forward will resume then. It was hoped that finance ministers would be able to reach an interim deal at that meeting to provide some breathing space for negotiations over a longer-term deal. This process now looks like it will take longer.''

"Despite this set back, we continue to see room for a long-term deal eventually. Greek finance minister Varoufakis said earlier in the week that he was committed to move ahead with deep reforms and agreed with about 70% of the current bailout. Germany and Europe want to use the current programme as a basis. These positions do not seem so far apart, and one of the differences may come down to wording. Greece wants to describe any deal as a new programme, while other EU countries want to describe it as an amendment and extension of the old one.''

"We think a new deal will have three pillars. First, a new/amended reform programme, with more emphasis on tackling tax evasion and vested interests, and less on welfare and social spending cuts. Second, debt relief for Greece, perhaps in steps, conditional on reform progress. Help on this front was promised to Greece in November 2012 by the Eurogroup. Third, a lower primary surplus target, which would fit with the lower level of debt and allow less aggressive fiscal consolidation. All these elements look politically feasible.''

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