EU finance ministers are expected to take important decisions on the future of the eurozone next week during their next monthly meeting in Brussels.
The Ecofin’s agenda will be taken up by possible fresh injections to the eurozone, the Commission’s proposals for the introduction of a Financial Transaction Tax (FTT) tabled yesterday (see story in today’s The Times) and Greece’s next €8 billion tranche, which has been withheld until the eurozone is satisfied with the progress being made by the Greek government to reach its debt reducing targets.
Malta, represented by Finance Minister Tonio Fenech, will have to make its position clear, particularly on the possibility of the introduction of a FTT.
Member states are divided on this issue and Malta is on the side of the UK opposing the new tax if not first introduced on a global level.
Rumours on a possible new grand plan to save the euro, including a possible managed default of Greece and a further injection to the bailout rescue fund, known as the European Financial Safety Facility (EFSF) are currently doing the rounds although top EU officials have so far denied the existence of such a plan.
Press reports emerging from a meeting of IMF and World Bank officials in Washington last week said that EU officials were considering a 50 per cent cut on Greek sovereign debt, coupled with a quadrupling of the size of the European Financial Stability Facility, the €440 billion fund that has been used to bail out Ireland and Portugal.
Economic Affairs Commissioner Olli Rehn has said that the EU was considering giving the fund “greater leverage to give it greater strength” but called the press reports as speculation.
On the other hand, Germany and the Netherlands both oppose the move and eurozone parliaments have yet to sign off on a first round of changes to the fund to allow it to lend its full €440 billion envelope and permit it to buy bonds on secondary markets, a task currently being undertaken by a very reluctant ECB.
Malta is expected ratify the July agreement by the end of next week.
EU sources told The Times Business that by the time of the meeting of finance ministers next week, more precise information is also expected to emerge on the real situation in Athens.
Officials from the EU and the International Monetary Fund (IMF) will be in Greece at the end of this week in order to resume talks on awarding the government a further tranche of aid from last May’s €110 billion bailout deal.
The Greek government has announced a number of new austerity measures to make sure it reaches a budget deficit target of 7.5 per cent of GDP this year, including public sector pay and pension cuts, a new property tax and a privatisation drive that aims to raise €5 billion by the end of the year.
The measures are necessary to convince Greece’s eurozone partners to pay out a further €8 billion in aid, which the country needs to repay debts maturing in October and November.
However, although Greek Finance Minister Evangelos Venizelos has insisted the country is determined to implement the measures EU officials are worried. Despite the pledges, no privatisations have yet gone through while public opposition to further austerity measures are increasing.