24 JUN 2011
By Leigh Phillips
EUOBSERVER / BRUSSELS - EU leaders on Thursday agreed to a fresh bailout of Greece so long as it passes further stringent austerity measures.
The further funding depends on the Greek parliament adopting a harsher five-year austerity programme next week. This would release €12 billion in EU/IMF aid, from the current €110 billion package, needed to avoid possible bankruptcy in the middle of July.
A second bailout of Greece is needed to stave off potential funding problems further down the line. The European contribution to the second Greek rescue package will again be limited to eurozone countries, following strong lobbying by UK leader David Cameron.
As a counterpoint to the further cuts to spending, hugely unpopular with Greek citizens, EU leaders also agreed unlock unused European funds to Greece.
"The European Council calls on the national authorities to continue implementing with resolve the necessary adjustment efforts to put the country on a sustainable path," they said in a late-night declaration.
The adoption by the parliament of the key measures "must be finalised as a matter of urgency in the coming days."
The bloc's 27 leaders said that heads of state and government endorse the proposal, first suggested on Tuesday by European Commission President Jose Manuel Barroso, which would see no new money offered to Greece, but rather accelerate the release of unspent money.
However, they failed to embrace the EU executive chief's figure of €1 billion that could be released.
The leaders instead said that they welcome the commission's intention to "enhance the synergies between" the bail-out and EU funds, and support "all efforts" to increase the country's capacity to absorb funds.
Only 25 percent of the country's allotted €20 billion in EU cash, from a variety of sources including structural funds, the EU Social Fund and technical assistance money, over the seven-year period from 2007-2013 has been spent.
"The problem has been a lack of absorption capacity," said commission spokesman Mark Gray, noting that Greece has one of the lowest rates of use of the Social Fund in particular in the Union.
He said that commission officials from DG Regio, the regional development department, are already in contact with Greek officials working to boost administrative capacity.
"They're not trained properly. They can't realise projects," he continued.
Keen to be seen to be offering something positive to Greece amid growing civil unrest and widespread opposition to the EU-IMF-ECB-imposed austerity and privatisation measures, officials highlighted how the Social Fund is the bloc's main financial instrument for combatting unemployment particularly amongst the young and poorly trained.
Read entire article
EU to sugar Greek pill with 'nation-building'