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17/07 – Financial aid on the way to Greece amid continued Grexit talks

The Greek crisis remains controversial. Financial aid is being unlocked to Greece via the ECB’s announcement yesterday and a probable €7 billion loan to be agreed today. But German finance minister Schaüble continues to talk of a possible Grexit.

Meanwhile, European Council President Donald Tusk’s interview on Greece appears in several media today (FAZ, Kathimerini, Rzeczpospolita, El Mundo). The ECB announced €900 million of additional ELA funding to Greece yesterday. The ECB President also spoke in favour of a debt cut. Naftemporiki comments that the ECB, the IMF and the European Commission agree that the Greek debt is not sustainable and that measures should be taken for its settlement. FAZ’s Philip Pickert elaborates that the ECB has accumulated ever more risks in Greece over the past weeks and months. The spiral of aid packages, promised reforms and foreseeable disappointments will continue.

Meanwhile, the Eurogroup gave yesterday the “green light” to the European Commission to start the negotiations with the Greek government for a third bailout programme. The agreement for the short-term financing of €7 billion to Greece in order to repay the IMF and the ECB before 20 July is expected to be finalised today, reports Naftemporiki. These news come amid reports that Wolfgang Schäuble said on Thursday that Greece could benefit from a substantial cut in its debt if it was willing to give up membership in the European common currency.

The WSJE’s Stephen Fidler says that the “fear of the unknown binds a deal with few believers.” FAZ’s Ulrich Schäfer says Mr Schäuble’s plan carries great risks and that Europe would be irreparably damaged in case of a Grexit. He warns that more has to be done to help the Greek economy recover. In an interview with several European papers (FAZ, Kathimerini, Rzeczpospolita, Mundo), Donald Tusk speaks of a promising deal. Mr Tusk told FAZ he considers Schäuble’s suggestion of a temporary Grexit a “legitimate idea”, but everybody wanted to prevent a Grexit. The crisis has revealed how “fragile” the European construction is, but it has also shown that the currency union works.

It is “absurd” to say that the reason for the Greek crisis is the euro, he notes. Overall, FAZ and Writschaftwoche say that no one believes the deal was good. FAZ’s Nikolas Busse notes that the “relentless quarrels” have left “deep marks.” The “Greek Odyssey” is far from being over, Mr Busse says. The Daily Telegraph’s Ambriose Evans-Pritchard writes that the Greek bailout deal is an atrocity: Greece has been publicly crushed and humiliated for no purpose, and German diplomacy is in ruins.

In a leader, The Economist highlights that a decent deal would have put Greece on the path to sustainable growth and taken the prospect of Grexit off the table. “Instead, Europe has cooked up the same old recipe of austerity and implausible assumptions.” In an opinion piece in Les Echos, Edouard Tétreau argues that this deal is “humiliating” for Athens and “insulting” for euro area countries like Spain, Portugal and Ireland which took the necessary savings measures and made good on their commitments. In an opinion piece in Libération, economist Benjamin Coriat writes that the European deal makes three losers: The Greeks lost because they will have to apply measures which they mostly hate; Europe lost because its inflexibility and cynicism can only result in a loss of support for the European Union project; François Hollande lost because France aligned with the German position and showed its inability to offer an alternative proposal.

Meanwhile, The WSJE says the Greek premier is likely to announce a cabinet shuffle by this weekend, in a bid to reduce resistance to the bailout. He could also call for a national unity government with opposition parties that support a bailout deal with Europe.

©europeanunion2015

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