Christmas spirit lacking in Greek bailout wrangles

BRUSSELS (Reuters) - Greece thanked creditors for modest debt relief on St. Nicholas Day in Brussels but did not hide disappointment it won’t get the Christmas gift it wants -- a pass on the latest phase of its bailout programme.

Athens has been hoping fellow euro zone governments will approve a second review of its third bailout, granted in August last year, before year’s end. A government spokesman said on Tuesday it did not yet rule that out.

But others, not least German Finance Minister Wolfgang Schaeuble, made clear that is highly unlikely after a Eurogroup meeting on Monday that revealed differences over how well Greece has done in meeting reform commitments.

That left Greece and its allies among its EU partners annoyed at stalemate. Athens wants to clear the review in order to be able to take advantage of selling bonds to the European Central Bank’s quantitative easing scheme.

“We could have got this done by the end of the year but the Germans are not moving,” one EU source said. “Greece has done a lot ... We haven’t been so strict in other programmes.”

A senior EU official involved in Monday’s talks described them as “useless” in terms of furthering agreement, according to another EU source. Ministers were at odds too on budget targets to set Greece after the bailout regime ends in 2018 -- conditions important in persuading the IMF to join in lending.

Schaeuble, whose hawkish stance risks getting harder by the month ahead of a German election in September, said Greece still had much to do: “The second programme review for Greece clearly still needs time,” he told reporters.

“There are some improvements but there is still a fair way to go.”


Among measures that Greece has yet to implement are reforms to its labour laws. The government, facing a population worn down by years of austerity, has warned creditors not to push it too far.

That applies, too, to the IMF, which did not take part in the 2015 bailout and insists that either the euro zone give Athens more debt relief or Greece legislates more spending cuts before the Washington-based lender will step in.

Germany has taken a lead in pushing for IMF involvement, seeing that as a political guarantee that Athens will be held to its commitments. But it also opposes writing off Greek debt.

The Eurogroup did agree to a series of short-term adjustments to the structure of Greek debt that will smooth out humps in repayments and should reduce its costs in the long run.

Government spokesman Dimitris Tzanakopoulos called that a “significant success”. But he said Athens still wanted Schaeuble and the IMF to scale back demands for more belt-tightening.

“They must stop insisting on continuing a policy of extreme austerity which has been proven destructive for society and also economically ineffective,” he said.

Schaeuble made clear he will not be swayed by pleas to forgo economic reforms which, he insisted, were for Greece’s own good.

Additional reporting by Renee Maltezou in Athens; editing by Richard Lough