Greece’s prospects for a third bailout will depend on whether Prime Minister Alexis Tsipras can win permission from euro-area finance ministers to restart talks with institutional creditors.
When Tsipras asked last week for a two-year European Stability Mechanism loan program, finance ministers halted the bid in its tracks. The European Commission can’t begin formulating a new program for Greece until the so-called Eurogroup, which is meeting Tuesday in Brussels, allows talks to recommence.
“We need a mandate from the Eurogroup,” European Commission Vice President Valdis Dombrovskis said in a Monday interview. “Only then we can start negotiating with Greece on the new program.”
Permission to design new bailout plans is the main concession Greece can wrest from the 18 other finance ministers when they meet Tuesday, according to two euro-area officials who asked not to be named because talks are private. If aid talks do restart, it could take several weeks for program design, conditions and debt analysis to take shape.
Greece’s prospects for a new aid package are crucial to its ability to keep tapping emergency support for its banking system. As long as politicians are talking, the European Central Bank may defer making any decisions about whether to shut off the flow of Emergency Liquidity Assistance.
The euro zone’s rules on bank aid and other assistance still apply to Greece’s situation, Spanish Economy Minister Luis de Guindos said Monday at a Madrid press conference. He said a bridge program for Greece “doesn’t seem possible” at this stage, and Greece will have to take the next steps to get negotiations going.
Dombrovskis said the prospects of fresh Greek aid are only one element of the commission’s efforts. “The second is to prevent a crisis from spreading, to ensure financial stability in the euro area, and on this we have all the necessary tools and all the necessary determination of euro-area authorities,” he said.
The Greek banks have been shut for the past week amid preparations for a Sunday referendum, which saw voters soundly reject previously offered aid terms. Because Greece’s second bailout expired on June 30, this week’s aid talks will start from square one.
“The hole has got bigger and bigger,” Maltese finance minister Edward Scicluna said Monday. “ That’s when you look reality in the face and say: I am going back to my country, are we going to ask our people to borrow again in order to lend to Greece when we don’t have certainty of getting our money back.”