The three European institutions that have kept Greece afloat during its financial crisis are threatening to turn off the cash tap.
The so-called "troika'' of the European Union, European Central Bank and International Monetary Fund wants Athens to enact economic reforms the country has promised -- many of them deeply unpopular in Greece -- by the end of the year or face consequences, European government sources said.
Only then would E.U. finance ministers provide more funding for Greece -- which is still reliant on outside support -- next year. Europe's current financial aid to Greece expires at the end of this month.
If the money runs out, Greek banks would receive barely any liquidity from the ECB anymore. Greek government bonds are actually rated too poorly to be used as collateral with the ECB, but the central bank has long made an exception as part of its euro rescue package for Greece.
If the current program expires without new funding being approved, the basis for the ECB's special leniency on Greek bonds would be eliminated. For Greek banks, there is reportedly about €40 billion ($50 billion) in liquidity at stake.
Greek government bonds are actually rated too poorly to be used as collateral with the ECB, but the central bank has long made an exception as part of its euro rescue package for Greece.
At the end of this year, Greece is supposed to receive a credit line of about €10 billion. This money is supposed to come from the European Stability Mechanism, an E.U. organisation set up in 2012 to safeguard financial stability in Europe by providing financial assistance to struggling euro zone countries.
In some countries, including Germany, the credit line has to be approved by national legislatures. This is why finance ministers from euro-zone countries are determined to complete the negotiations before Christmas.
But whether an agreement is reached before a planned meeting of these ministers on Monday is becoming increasingly uncertain, E.U. diplomats in Brussels said. The gridlock means it is likely that the current aid program will be extended by up to 18 months.
In Greece, the troika is accused of sabotaging negotiations by making ever-changing demands.
But the working assumption is that the Europeans are determined to extend the current system of aid to Greece for the good of all euro zone members.
Greece could be heading for elections in March.
A few European governments want to wait until those elections are over before agreeing on a new credit line with Greece.
Ruth Berschens is Handlesblatt's Brussels bureau chief; Jan Hildebrand is the deputy Berlin bureau chief; Gerd Höhler is the southeast Europe correspondent, based in Athens. To contact the authors: [email protected], [email protected], [email protected]