Stournaras’ crucial meetings with Schäuble and Westerwelle

Yannis Stournaras seems to have an advantage over his predecessors. Rumor in Berlin has it that Wolfgang Schäuble likes him, unlike Yorgos Papakonstantinou for example, whom he did not even want to deal with. 

Officials from Berlin and the Greek Finance ministry say that during Schäuble’s first meeting with the Greek finmin in his first Eurogroup in July, the German head of economy appreciated Stournaras’ stance and his views on the Greek economy. The Greek minister’s motto “first we do and then we ask” seems to have satisfied Schäuble. 

We will know for sure if this liking is real on Tuesday afternoon, when Yannis Stournaras completes his round of contacts in the German capital with Schäuble, Westerwelle and their close associates. 

One of the major issues he will raise is the ECB's decision to stop funding Greek banks in May. This decision was taken by ECB head Mario Draghi, as following the statute of the Euro bank, he interrupted the access of Greek under-capitalized banks to the main refinancing mechanism. The borrowing valves will reopen after the recapitalization of banks, and in the meantime they will be funded by the mechanism of the Bank of Greece (ELA), albeit at a highly increased cost. 

Apparently Stournaras wants to highlight the major risks associated with a possible delay of the 32-billion-euro installment as the recapitalization of Greek banks depends on it. As the installment is delayed, the ECB cannot open the funding valves. 

Stournaras explains that "we will raise the issue of recession directly affecting society and the market" and that "we soon need to change the model of economic policy." He adds that "besides recession which keeps growing (estimated around 7% this year) and bringing new measures, the Troika has increased spending cuts questioning the ability of Greece to crack down the underground economy, tax evasion and contribution evasion." 

Stournaras knows (or rather he doesn’t) what will happen if the differences in the budget implementation against the memorandum goal in the last 4 months of 2012 are confirmed, or what will happen with the nearly 7 billion euros of arrears that have been stagnating since last spring. The Troika has accepted deficit deviations in the past, but in return it asked for additional measures afterwards. 

He believes that "only a dynamic mobilization of the Financial Crime Unit, the judiciary and the entire tax administration can provide the solution to painlessly closing this year's hole and give intention hints to our lenders, who either now or later will have to re-assess the package of measures." 

Stournaras’ meeting with Schäuble will take place three days before the arrival of the senior Troika team in Athens and ten days before the crucial Nicosia Eurogroup, while on September 13 he will meet with French Finance Minister Pierre Moscovici in Athens.