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Thursday August 18th, 2022

Euro ministers give blessing to Greek bailout, wooing IMF on debt

(Reuters) – Euro zone finance ministers agreed on Friday to lend Greece up to 86 billion euros ($96 billion) after Greek lawmakers accepted their stiff conditions despite a revolt by supporters of leftist Prime Minister Alexis Tsipras.

Assuming approval by the German and other parliaments, 13 billion euros should be in Athens next Thursday to pay pressing bills and a further 10 billion will be set aside at the European Stability Mechanism, earmarked to bolster Greek banks’ capital.

In all, euro zone governments will lend 26 billion euros in a first tranche of the bailout before reviewing Greece’s compliance with their conditions in October.

One remaining uncertainty – aside from Tsipras’ ability to deliver sweeping budget cuts and privatisations opposed by many of his own party – is the role of the International Monetary Fund. After backing two previous bailouts, the IMF renewed its call for the Europeans to grant Athens debt relief – a bone of contention between the Eurogroup and the Washington-based Fund.

Managing Director Christine Lagarde told the Eurogroup by telephone that she could not commit until the IMF board reviewed the situation in the autumn. Officials said the Fund needed more assurances and detail on Greek reforms, notably to pensions, and steps to persuade it that Greece’s debt burden was sustainable.

But after deadlock since January that ravaged the already weak Greek economy and ended in a dramatic U-turn a month ago by the anti-austerity leftist government to avert Athens’ expulsion from the euro, there was a cautious sense of optimism among ministers gathered in a Brussels deep in summer holiday languor.

"After six months of very difficult negotiations with lots of ups and downs, we finally have an agreement," Greek Finance Minister Euclid Tsakalotos told reporters. His appointment by Tsipras six weeks ago in place of his abrasive predecessor has been hailed by counterparts as a mark of a new Greek "realism".

"After the changes in the government and the crises that we had, the cooperation with let’s say the changed Greek government is very constructive, very well organised," Jeroen Dijsselbloem, the Dutch minister who chaired the meeting, told reporters.


Even Germany’s Wolfgang Schaeuble, who last month floated a Greek exit from the euro as Tsipras hesitated to agree terms with fellow leaders, sounded upbeat, if still wary of a new tone in Athens that caused an angry split in Tsipras’ leftist party, with nearly a third of Syriza lawmakers rebelling in parliament.

"We will have to wait and see," said Schaeuble, who has become a hate-figure for rigid austerity among Greeks tired of five years of soaring unemployment. "This is an opportunity. But what is decisive is that Greece does what it says it will do."

Schaeuble was among numerous ministers who stressed they saw it as vital that the IMF take part in the third bailout, as it has in two programmes totalling 240 billion euros since 2010.

Not only would IMF lending reduce the amount needed from Europe – possibly by a sum similar to the 16 billion euros the Fund had ready when the second bailout programme expired – but the IMF’s reputation for rigour would reassure sceptical parliaments and financial markets that conditions would be met.

Lagarde said in a statement that Europe would need to provide "significant" debt relief as a complement to reforms Athens is trying to put Greece’s finances on a sustainable path.

"I remain firmly of the view that Greece’s debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own," she said, highlighting what has become a significant bone of contention with the European institutions with the IMF helped negotiate the new accord.

Led by Germany, euro zone governments have ruled out taking a "haircut" to reduce the nominal principle of Greece’s debts to them. But the Eurogroup said in its statement that it would consider longer grace periods and repayment periods if Greece successfully met its loan conditions by an October review.

Dijsselbloem said it was still unclear that Greece could not afford to service its debts but he was optimistic differences with the IMF could be overcome. French Finance Minister Michel Sapin, among strong supporters of helping Greece stay in the euro zone, said that a consensus was emerging on the Greek debt.

Critics of past bailouts argue they can create a downward spiral as governments pump money out of the country to service foreign loans, choking domestic economic activity that generates the tax revenues the state needs to pay its debts. EU officials argue that Greece is borrowing already on very favourable terms.

While the broad outlines of the bailout agreement were set at a marathon, all-night summit a month ago and further filled in by negotiators who concluded a draft on Tuesday, euro zone ministers devoted some of their six-hour meeting to detailing a plan to recapitalise Greek banks. These have been ravaged by the uncertainty and by capital controls imposed in late June.

The agreement foresees up to 25 billion euros being set aside for bank capital, with 10 billion of that immediately and up to 15 billion by mid-November, after officials conduct stress tests of the banks’ requirements. Shares issued by banks in return for capital are to be placed in a privatisation fund.


After debating through the night, the Greek parliament gave its backing to Tsipras’ plans to legislate what creditors want, though he had to rely on opposition votes after nearly a third of his own supporters rebelled, forcing him to consider a confidence vote that could pave the way for early elections.

After defeating conservatives in January, Tsipras remains hugely popular for standing up to Germany and he would be expected to win again, given an opposition in disarray.

A hardline faction in his party effectively gave notice it might break away, raising the prospect of Tsipras having to build a new, possibly unstable, coalition.

That could mean further uncertainty in Greece and in a wider euro zone economy which data on Friday showed still struggling to meet even modest growth expectations.

EU leaders say new measures to consolidate the euro zone mean threats to its survival are much weaker than when it first was hit by the global debt crisis. But German-inspired fiscal rigour despite continued high unemployment, especially among the young, continues to fuel opposition to European integration.

Nonetheless, Tsipras defended his abandonment of election promises he made to austerity: "I do not regret my decision to compromise," he told the parliament in Athens. "We undertook the responsibility to stay alive over choosing suicide." (BRUSSELS/ATHENS, Aug 14/2015)

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Sri Lanka rupee, yields in govt securities slightly changed

ECONOMYNEXT – Sri Lanka Central Bank’s guidance peg for interbank transactions weakened on Thursday (18) and yields in Treasury bonds picked up slightly while in T-bill edged down in dull trade after the central bank kept key monetary policy rates steady, dealers said.

On Thursday, before the market opened, the central bank held its key policy rates steady at 15.50 percent, while data showed market interest rates are close to twice the rate of them while private credit and imports falling as a consequence.

The central bank is injecting 740 billion rupees of overnight money to banks at 15.50 percent, which were originally injected mostly after reserves were sold for imports (or debt repayments) to artificially keep down rates (sterilized interventions), effectively engaging in monetary financing of imports.

The injections (sterilizing outflows) prevent the credit system from adjusting to the outflows and encourage unsustainable credit without deposits, which is the core problem with soft-pegged central banks, triggering a high rate and an economic slowdown later.

A bond maturing on 01. 06. 2025 closed at 27.90/28.00 percent, slightly up from 27.75/90 percent on Wednesday.

The three-months bill closed at 28.30/29.25 percent, down from 29.25/30 percent on Wednesday.

Sri Lanka’s central bank announced a guidance peg for interbank transactions weakened by one cent to 360.97 rupees against the US dollar on Thursday from 360.96 rupees.

Data showed that commercial banks offered dollars for telegraphic transfers between 367.97 and 370.00 for small transactions.  (Colombo/ Aug 18/2022)

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Japan grants medical equipment worth 500-mn yen to Sri Lanka govt hospital

ECONOMYNEXT –  The  Japanese government has granted medical equipment worth 500 million Japanese yen to the Sri Jayawardenepura government hospital to improve the hospital’s treatment facilities under Japan’s Non-Project Grant Aid Programme.

A statement by the Department of External Resources said the grant was given in response to a request by Sri Lanka’s government.

Under the 500 million Japanese yen (approximately 1,265 million rupees) grant assistance, angio-CT machine, other radiology equipment, ophthalmic instruments, surgical instrument sets (stainless steel with satin finish), 15 dental units with accessories, liver transplant instrument sets, and a cardiac catheterization laboratory will be provided, a statement said on Thursday August 18.

Sri Lanka due to its worst economic crisis in its post-independence history is currently facing shortages of essential medicine, non-essential and lifesaving medicines pressuring the health sector to only attend to emergency cases to preserve available limited medicine stocks.

On Thursday at the policy rate announcement media briefing by the Central Bank of Sri Lanka (CBSL), Governor Nandalal Weerasinghe said, with the strict measures taken in the recent past, Sri Lanka is currently managing the limited forex income coming into the country to purchase essential goods such as fuel and medicine.

Sri Lanka has received various grants from several countries including China and India which gave a 200 million US dollar credit line to purchase medicine from India.

In June, Minister of Health Keheliya Rambukwella said there is no shortage of vital medicines in the country and all medicines will be restocked by August 2022. However, shortages of medicine aer still being reported in various hospitals islandwide.

“This improvement at the hospital will facilitate the enhancement of the quality of the care provided especially to the patients with non-communicable diseases while enabling high quality medical professional training to medical undergraduates and postgraduates from the National School of Nursing at the aculty of Medical Sciences of the University of Sri Jayawardenepura,” the External Resources Department statement said.

“This project will eventually assist the development of human resources of the health sector in Sri Lanka,” it said. (Colombo/Aug18/2022)

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Sri Lanka immigration on the hunt for Scotswoman who documented protests

Kayleigh Fraser via @kayzfraser Instagram

ECONOMYNEXT – Sri Lanka’s Immigration and Emigration Department is attempting to track down Kayleigh Fraser, the Scotswoman who documented the country’s anti government protests.

Fraser was ordered to leave the island on or before Monday August 15 after officials cancelled her visa. She and her lawyer had filed a writ petition against her deportation with the Supreme Court, which was dismissed on the grounds that she was not being deported deported, only had her visa cancelled.

“The learned State Council submits that the impugned document ‘X4’ is not a deportation order as claimed by the petitioner and she confirmed that no deportation order has been made up to date by the authorities against the petitioner,” a court document shared by Fraser said.

Immigration officials stated that the police and SSD were on the lookout for Fraser.

“Her visa was cancelled on August 15, so we are looking to put her in a detention camp until she can get a ticket to leave the country,” the official told EconomyNext, confirming that Fraser was not getting deported but that her visa was cancelled.

“Legally we cannot give her a grace period, but on a humanitarian basis, we can give her the time to get a ticket,” the official said.

Fraser had used her social media to share pictures and videos of the anti-government protests in front of the Presidential Secretariat, and has been vocal against state sanctioned violence against protestors.

“Given what I have witnessed here in Colombo – the chemical weapons attacks on protestors, the government instructing the military to beat and torture protestors, the arbitrary arrests and blackmailing of prominent faces from the protests, intimidation tactics and threats etc – I should not be surprised at what has happened today,” she said, speaking to the Daily Record, a Scottish tabloid.

There were no reports of chemical weapons being used against any protestors in Sri Lanka, and it is unclear whether Fraser was erroneously referring to tear gas which was used to disperse crowds.

Fraser also called out media channels who she claimed had attempted to misrepresent peaceful protests as violent.

“It became very clear to me early on that this was not being reported. There was no international coverage on what was happening, and the media here were very much trying to say that it was violent, but that is the absolute opposite of what I saw,” she said over social media.

“What I saw was a beautiful union [of people] coming together in absolute unity. It was a beautiful movement and I’ve never seen anything like that in my life and that kept me coming back.”

However, Sri Lanka’s authorities maintain that the arrests so far have been legal and that violence did occur on the part of some protestors, though activists and some civil society groups disagree. On May 09, after supporters of then Prime Minister Mahinda Rajapaksa launched an unprovoked attack on peaceful protestors in Colombo, a wave of retaliatory mob-violence erupted across the country which saw the residences of some parliamentarians torched to the ground. One government MP was killed.

Authorities say many of the arrests so far have been of protestors who had violated court orders or had illegally occupied government buildings.

Fraser continues to post on her social media. (Colombo/Aug18/2022)


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