Dominique Strauss-Kahn’s arrest has complicated discussions and preparations for the terms of a new aid loan to Greece, but it hasn’t change the overall direction.
Diplomatic sources told Capital.gr late Sunday that if Straus-Kahn hadn’t been arrested, he and Angela Merkel would agree on the establishment of a committee that would be responsible for privatizations (sale of state’s participation in public enterprises and development of real estate assets), and it would be collateralized for the new aid loan.
As Capital.gr had mentioned weeks ago, this proposal was initially raised by Finns and was reinstated by Germans after the meeting in Luxembourg last Friday. Dominique Strauss-Kahn would argue that Greece can not meet its obligations in 2012 without extending the loan of €110 billion.
Strauss-Khan’s arrest certainly delays developments, as this agreement would informally give the green light for the launch of the relevant preparation, as a condition for extending of Greece’s loan of €110b and agreeing on a new aid loan.
According to same sources, Strauss-Kahn would go to Berlin with the assessment that the Greek government is no longer able to continue the implementation of the Memorandum of Understanding, raising a political issue of who would implement the program.
However, Angela Merkel does not share this position, doubting whether early elections in Greece would solve the problem or would further complicate the situation.
He proposed to launch a revision of the Memorandum, without reversing last year’s agreement. This could be achieved only with the provision of a committee that would guarantee under direct supervision of troika the privatization of public property of €50b.
According to IMF, the package of €50 corresponds only to 1/5 of privatizations that Greece could implement.
In any case, Nemat Shafik, deputy director of IMF, will replace Straus-Kahn in Brussels, however no decisions are expected. An extraordinary Eurogroup meeting is very likely when a report about Greek debt sustainability is formally in the hands of finance ministers.
In other words, developments are expected within the next two weeks, regarding the release of the 5th aid trance and the overall revision of the Memorandum.
CAPITAL
