Greece needs further time to meet its obligations and avoid bankruptcy. European diplomats confirmed on Monday in Brussels that it was unlikely that Greece would be able to balance its budget before the deadline of 2015. The deadline to be debt-free by 2020 is also unlikely to be met. Athens will not be able to refinance itself on the open market until at least two years after the deadline, assuming all goes according to plan. Both European central banks and diplomats in Brussels agree that 30 billion euros of extra funding is necessary.
This development makes it unclear if and when the nearly bankrupt country will receive the second round of financial aid. The International Monetary Fund has nearly 130 billion euros available but should only pay the money if Greece meets its obligations to operate independently before 2020. The IMF also expects to have a payment plan in place before the money is transferred in order to satisfy its own statutes. If this fails, the responsibility falls back on the European Union. IMF Boss Christine Lagarde meets this week with the European Finance Minister to attempt to find a way out. The meeting is expected to discuss giving Greece more time to put reforms in place and to ask the European Union to take on some of the costs. These costs will fall on all the European states, including Germany.
Analysts see the following possible outcomes. Greece will begin with 10 billion euros less in funding but in return will start payments later than planned (that is, after they have put in the required reforms of the tax system and legislated for the sale of state assets.) At the moment, Premier Minister Antonis Samaras is asking for two more years simply to make the cuts to costs required to balance the budget. Because of the financial crisis - Greece's economy has shrunk for the last five years - it looks like Samaris' attempts will fail in the short term. He fears that if this is the case, unemployment will raise further.
The European Union wants to keep Greece in the eurozone and for them to continue to be able to use the euro but are finding it increasingly hard to convince sceptical citizens, let alone justify further funding. Despite these difficulties, central banks have stated that Greece needs 30 billion euros immediately. The problem is who should provide this funding, with governments attempting to shift the burden onto the central banks and the central banks (who are already owed an estimated 40 billion euros) asking for help. In August, Greece receives emergency funding of 3.5 billion euros. If they cannot come to an agreement before then, Greece and the euro states could find that any aid is wasted.