The efforts of the Greek government to boost employment through a loan from the World Bank must be put on hold. And there are two reasons for this, reasons that have directly to do with the World Bank.
According to exclusive information of daily Naftemporiki, a standing and inexorable condition before any substantive talks can proceed on possible World Bank funding is a conclusion to the now year-long delayed second review of the Greek program. Another condition is for a clear picture of Greece’s fiscal “envelop” to emerge, given that any new loan would ostensibly be tacked on to the crisis-bedeviled country’s debt load.
Given the WB’s close cooperation with other international financial institutions, especially the International Monetary Fund (IMF), the development bank’s leadership will surely request information and a “green light” from the country’s institutional creditors for any new lending towards Greece.
“Institutional creditors” in this case are the EU Commission, European Central Bank, European Stability Mechanism (ESM) and the IMF. According to the latest estimates, the most likely scenario is for whatever WB lending to be in the millions instead of billions, and funneled towards employment-training schemes. However, at last word, the WB has not touched on exact figures, as discussions would follow completion of an arrangement between Greece and the institutions.
In any case, the World Bank is already providing know-how to Greek authorities to improve social protection, along with the often-depressed business and investor climate in the east Mediterranean country.
Dirk Reinermann, WB Manager for Southern Europe, told Naftemporiki
“The Greek government has asked for World Bank technical assistance and financing to make progress in the area of employment. As part of our ongoing technical assistance a World Bank team is working with the Government on the technical design of a program that would improve the chances for employment of the long term unemployed, especially young people. Before we can discuss World Bank financial support the Greek Government is aware that it needs to reach agreement with its creditors on the fiscal envelope in the context of the second review. Also, as per regular World Bank procedure, any possible financing would be subject to approval by the Board of Executive Directors.”
At present, the WB is implementing programs in no less than 10 EU member-states, but is extending a credit line to only four EU members: Bulgaria, Croatia, Poland and Romania.
Beyond sovereign lending, however, the World Bank has been adept at funding private sector investment schemes, with a characteristic example being the IFC’s decision to participate in the financing of a German-Greek consortium (Fraport Greece) that will soon assume a concession to manage 14 regional airports around Greece, including ones that serve the top tourist destinations in the country.
The World Bank has also recently participated in the recapitalization of Greece’s four systemic banks to the tune of 150 million euros. As such, the Washington D.C.-based institution is a keen observer of developments regarding the issue of non-performing loans (NPLs) and non-performing exposures (NPEs) plaguing Greece’s credit system, as well as the issue of financing “liquidity-starved” SMEs in the country, Naftmporiki notes among others.
Beginning of March, the Greek government approached the World Bank for a 3 billion euro loan.
Athens turned to the World Bank to obtain funds for a program to reduce the country’s 23% unemployment rate by creating around 100,000 job openings a year over the next three years.
BTW: the transfer of the 14 regional airports to Fraport concludes today.
