Trust is in short supply among finance ministers and their Greek counterpart as to whether any deal on debt - if agreed - would ever be implemented effectively.
Eurozone finance ministers are in Brussels in a bid to thrash out plans for a third Greek bailout, likely to worth in the region of €70bn. The meeting follows the delivery of a proposed reform package from the Greek government to its international creditors last Thursday.
Advertisement
After several months of acrimony and brinkmanship, some sides say that progress could emerge but the issue of trust is a huge obstacle.
Head of the eurogroup - the collective of 19 finance ministers - Jeroen Dijsselbloem says “a lot of criticism on the proposals remains,” particularly on the reform side and the fiscal side.
“There is also the issue of trust,” as to whether the Greek government “can actually be trusted to do what they’re promising; to implement in the coming weeks, months and years,” he said.
The new Greek proposal involves reforms in the areas demanded by its creditors such as tax collection reform and an increase in corporation tax to 28 per cent from 26 per cent. On VAT, they propose a rise to 13 per cent from 10 per cent, and on the issue of pension reform, the government says it will raise the age of retirement to 67 and “create strong disincentives to early retirement.”
“It’ll be a difficult meeting; there are many concerns,” said Dijsselbloem - who is also the Dutch Finance Minister - to reporters on his way in to the meeting.
Also speaking ahead of the meeting, Irish Minister for Finance Michael Noonan displayed cautious optimism, but concurred on the issue of trust, saying he hopes “trust can be rebuilt.”
Noonan also said he had concerns about parts of the proposed reforms, particularly in the area of banking, as nowhere in its document did the Greek government address this significant issue.
Greek banks have been closed for two weeks and huge anxiety is growing as to whether they’ll reopen next week.
“The Greek paper was silent on banking; the Greek banks are in difficulty now and it’s going to cost money to put them back on an even keel. We’ll need a full briefing on that,” said Noonan.
German Chancellor Angela Merkel is adamant that a deal is done to keep Greece in the eurozone. Her Finance Minister Wolfgang Schauble is far more willing to allow Greece leave the common currency however, but is under strict orders from Merkel to secure an agreement, say German sources.
On other issues of substance, Michael Noonan said a ‘medium term sustainable program’ is required, as is a detailed plan for job creation and economic growth.
“Sustainability depends a lot on whether the programme is sufficient to cause the Greek economy to grow and create jobs.
“I’ll be looking at the overall combination of measures to see can the economy can grow and can jobs be created. I think there are extra measures needed there,” he said.
The meeting is likely to go on for several hours and is to be succeeded by an extraordinary meeting of eurozone heads of state and government tomorrow.
However if there is significant progress today, it’s likely this meeting and the summit of the 28 leaders in the EU later on Sunday night will be called off.
