Greece is living on borrowed money – at high interest rates – until its international lenders release a $38.8 billion loan, and will have to borrow money on Nov. 13 to pay previous loans until the money is disbursed.
Despite approval of a $17.45 billion spending cut and tax hike plan on Nov. 8, finance ministers from the Eurozone aren’t expected to act at a Nov. 12 meeting to give their imprimatur for release of the loan from the Troika, which includes the EU, International Monetary Fund and European Central Bank.“We’re not out of the woods yet,” Schaeuble said at a panel discussion in Hamburg.
“At the moment, I don’t see how we can take the decision already next week.” Greek Prime Minister Antonis Samaras warned that unless the aid is released that Greece would run out of money on Nov. 16 so Athens will hold an auction on Nov. 13 for two interest-bearing promissory notes, one for four weeks at 2.15 billion euros, or $2.7 billion, and the second for 13 weeks for 1 billion euros, or $1.27 billion.
The combined 3.125 billion euros, ($3.97 billion) along with competitive offers of 5 billion euros ($6.35 billion) matches borrowings in August as Greece is in a cycle of constantly borrowing money to pay previously unpaid loans.
Eurozone leaders are weighing whether the new spending cut and tax hike plan that imposes more austerity on workers, pensioners and the poor goes far enough in overhauling the economy and showing that Greece, the origin of the three-year-old debt crisis, deserves to continue tapping international aid, the official said.
Donor countries such as Germany also need national parliamentary endorsement before giving the green light to the next payments from a total of $325 billion pledged to Greece since 2010.
Samaras has pressed for two extra years, until 2016, for Greece to meet deficit-reduction targets imposed by the Troika, but that would require as much as 30 billion euros, or $38.15 billion in additional loans, worsening the country’s debt despite austerity.
Solutions hinge on when Greece’s debt will become “sustainable,” previously defined as dropping to 120 percent of gross domestic product by 2020 and one EU official told the Bloomberg news agency that the target may be pushed back to as far as 2023.
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