Eurozone in Discussions to Extend Greece’s Bailout by Six Months

Written by | Monday, December 8th, 2014

Eurozone countries are contemplating the possibility of extending the Greek bailout by half a year to mid-2015. Athens have already reacted that Greece was only willing to accept an extension of a couple of weeks but certainly not six months. Extending the unpopular program beyond a few weeks would jeopardize efforts of the incumbent Prime Minister of Greece, Antonis Samaras, to win the presidential elections in February next year. He has been very dependent on exiting the EU-IMF bailout program by the end of this year, when EU’s part of funding should end.  

Greece will have been granted about 240 billion euros since 2010 but an extension is still being considered because international lenders and the Greek government are still amidst negotiations on what the country must do in order to receive the remaining 1.8 billion euros and thus secure a back-up credit line once the bailout is over. Then, Greece should return to market financing. Greece had to finalize its bailout program by the time a meeting of eurozone ministers takes place on 8 December in order to wrap up the whole project by the end of this year. Yet, negotiations have been difficult due to a budget shortfall in 2015. A semi-official explanation says that the Greek bailout will have to be extended because a credit line to replace the program will not yet be in place. Eurozone’s leadership is now prompting Athens to reach an agreement by mid-December.

The official document readied for eurozone finance ministers clarifies that the purpose of this technical extension is to provide Greece with more time, but it should nevertheless be a longer period to “cover for the possibility of delays in the run up to the Greek presidential elections”. Thus, an extension until mid-2015 is seen as appropriate provided that a staff level meeting agreement will be reached by December 8, all prior actions will be finalized by mid-January, and the very last disbursement from the eurozone bailout fund will be completed before the end of January.

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