The report by the ‘troika’ of Greece’s foreign lenders — the European Commission, European Central Bank and International Monetary Fund — was expected during October, possibly before a meeting of euro zone finance ministers on October 8.
The study provides the basis for decisions on whether to disburse the next tranche of aid to Athens, which may otherwise run out of money to pay wages and pensions, default on its debt and perhaps be forced to leave the euro area.
Differences inside the troika about the precise extent of Greece’s debt problems, combined with political pressure to hold off for another few weeks, look likely to mean a delay until mid-November. In the meantime, Greece will be kept afloat by issuing short-term treasury bills and its banks will get access to emergency funds from the Greek central bank. “The Obama administration doesn’t want anything on a macroeconomic scale that is going to rock the global economy before November 6,” a senior EU official told Reuters, adding that previous troika reports had also slipped.
The European Commission’s representative on the troika, Matthias Mors, denied that the report could be delayed, and an official at Greece’s finance ministry said he had been assured that there would be no slippage. A U.S. official said the United States had made clear to European officials that it wanted to avoid any “downside” economic surprises because of the fragile U.S. recovery, but denied that it had anything to do with the U.S. election.
Several sources in Germany described those conversations with their U.S. counterparts and said the message had been that the Americans didn’t want surprises before the election. Most polls show President Barack Obama leading his Republican rival Mitt Romney, but voters remain sensitive to any event that could damage U.S. economic growth and hurt jobs. “It’s likely the troika report will be pushed back beyond the U.S. election date,” said a Berlin official who spoke on condition of anonymity. Asked if that was a special request from Washington, he replied: “They don’t want any surprises.”
The European Commission’s spokesman on finance said on Friday the troika would take a week-long break from its work in Athens, the second time it has interrupted its mission since it began in late July, adding to expectations of a delay.
“The inspectors are expected to return to Athens in about a week,” spokesman Simon O’Connor told reporters.
“As for a conclusion of the mission, I don’t have any dates to share with you,” he said, adding that it should be some time during October. “We can’t say exactly when.”
“THEY DON’T WANT ROMNEY”
Even if the mission does conclude its work on the ground in October, it will still take some time to write up its findings, the focus of which will be whether Greece will ever be able to get its debt down to a sustainable level.
That analysis will either show that Athens can reduce its debts below 120 percent of gross domestic product by 2020, as required by the IMF, or that the target will be missed.
If Greece is off-target by a wide margin, as many economists predict, financial markets will react negatively, concerned that another round of debt restructuring will be required to get government finances back on a stable footing. A negative troika report could also revive pressure to force Greece out of the single currency area with potentially devastating knock-on consequences for other European countries and the global economy.
European leaders have the same interests as the U.S. president in not destabilizing markets — their own economies have also been badly affected by the fallout from Greece, where the sovereign debt crisis began in January 2010.
But one source said EU leaders’ motives went beyond macroeconomic stability. They also had political reasons to avoid rocking the boat before the U.S. election.
“As far as European leaders are concerned, they don’t want Romney, so they’re probably willing to do anything to help Obama’s chances,” said the source, an EU official involved in finding solutions to the debt crisis.
The problem for Obama is that if Europe’s leaders are seen, implicitly or otherwise, to be working to bolster his reelection chances, it could provide ammunition for the Romney campaign.
European leaders have repeatedly been accused of acting too slowly and in a confused way to resolve the crisis, with a knock-on negative impact on the United States. If they are now seen to be allying with Obama, it could dent his popularity.
