At the summit of Eurogroup leaders on Tuesday Chancellor Angela Merkel once again called on Greece to present a detailed reform agenda as a basis on which to negotiate an assistance package. This Sunday is the "absolutely final deadline," declared European Council President Donald Tusk.

Strict conditions apply to ESM assistance

Any new assistance programme for Greece would be based on the European Stability Mechanism (ESM). It involves several stages and imposes strict conditions on any financial assistance granted. More information on the ESM is available on the website of the Federal Ministry of Finance.

Before any financial assistance can be granted, the country requesting assistance must put forward a viable reform programme which is to improve the country’s financial situation and economy on a sustainable basis.

Tight deadlines

The Eurogroup finance ministers, who together make up the Board of Governors of the ESM, will discuss the outcome of the review conducted by the experts of the European Commission, the European Central Bank and the International Monetary Fund (IMF). All of these steps will have to follow within a very short space of time. Then the Eurogroup leaders will meet this Sunday to decide whether or not Greece’s proposals constitute a basis for further negotiations.

Although the Eurogroup states may decide without the other EU member states on an assistance programme for Greece, the heads of state or government of all 28 member states will meet in Brussels on Sunday. The non-Eurogroup states asked to be included, since they too are affected by the crisis. If, for instance, European Union funds are to be used as emergency aid for the Greek people, this would affect all 28 states. The Eurogroup will meet first alone, followed by a meeting of all 28 member states.

Bundestag mandate required for negotiations

Should the heads of state or government decide in Brussels that further negotiations can go ahead, the German government will request a mandate to negotiate from the German Bundestag. Then the negotiations per se can begin.

If talks fail

So far the European Central Bank (ECB) has lent heavily to Greek banks to prevent the country’s financial system from collapsing. If the Greek reform programme is rejected on Sunday, it is unlikely that the ECB will be allowed to extend any more loans.