Friday

16th Nov 2018

Greek deal: details and next steps

  • Greek MPs to vote Tuesday or Wednesday (Photo: Αλέξης Τσίπρας Πρωθυπουργός της Ελλάδας)

Monday’s (13 July) Greek deal is just the first step in a long process that might unlock up to €86 billion of new aid.

Jeroen Dijsselbloem, the chair of the Eurogroup of finance ministers, told press: “The final completion of a deal could take a number of weeks”.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • Eurogroup to discuss bridge-financing Monday (Photo: Consillium)

Christine Lagarde, the head of the International Monetary Fund (IMF), noted: “The [summit] agreement is a step toward creating confidence and … there’ll be many more steps needed to implement what has been agreed”.

The summit produced a seven-page document, which envisages two sets of Greek reforms, as well as additional steps.

The first set is to: improve VAT collection; broaden the tax base; reform the pension system; copper-plate the independence of the Greek statistical office; and create a system of “quasi-automatic” budget cuts in case the Greek economy underperforms.

The second set is much bigger.

It includes: deeper pensions cuts; new retail laws, for instance, introducing Sunday trading; opening up of “macro-critical” professions like ferry transportation; privatisation of the electricity grid; weakening of trade unions; and ending “political interference” in bank sector appointments.

It also includes the creation of a €50 billion Greek asset fund.

The fund is to be based in Greece and managed by Greek authorities, but under the “supervision” of EU institutions.

Dijsselbloem said “experts” will assess which Greek assets will be placed under the fund’s ownership. But French leader Francois Hollande said up to half of it will be Greek banks.

The income generated by the fund, part of it through privatisations and part by what Dijsselbloem called “running” of the assets, will be chopped into three pieces.

Half will be used to recapitalise Greek banks.

One quarter will be used to reduce the GDP to debt ratio and one quarter for investments in the Greek economy.

The additional steps include request for fresh IMF assistance, and compliance with IMF monitoring, from 1 March 2016.

They also include reform of the Greek judicial system, to end government clientelism.

Next steps

The next step will be for Greek MPs, on Tuesday or Wednesday, to ratify the summit document and to enact the first set of reforms into law.

If Greek MPs agree, the other 18 euro-states’ governments and parliaments will ratify the summit document, with the most hawkish parliaments - in Finland and Germany - the ones to watch.

Dijsselbloem said this should take place on Thursday or Friday. But he added: “It’s difficult to say when, because they’re sovereign parliaments, so they’ll decide on their own timetables”.

If the votes are in the bag, the Eurogroup and the board of the European Stability Mechanism, a Luxembourg-based crisis fund, will start talks with Greece, possibly next weekend, on a “memorandum of understanding”.

The memo will flesh out details of the second set of Greek reforms.

If there’s an accord, it will unlock between €82 billion and €86 billion of ESM assistance over the next three years.

Between €10 billion and €25 billion is to be used for bank recapitalisation.

One billion will be placed in a special account for emergency use.

If the ESM deal is put in place, and if the first “programme review” confirms Greek compliance, Dijsselbloem said “we’ll also have to deal with financing of Greek debt and [long-term] debt sustainability”.

The summit document says this might include “longer grace periods” for Greece to pay back loans.

But both the document and German chancellor Angela Merkel underlined there’s no question of debt relief, or “haircuts”.

The document added that, over the next three to five years, the European Commission will channel €35 billion from its flagship “Juncker fund” to Greece.

One billion euro will be front-loaded for an immediate boost.

Bridge-financing

Long and medium-term issues aside, Greece also needs to repay private and public sector bonds in the coming days to avoid default

One crucial bill is €4.2 billion, due to the European Central Bank on 20 July.

But the summit document estimates that Greece needs €7 billion to cover July and €5 billion more up to mid-August.

Dijsselbloem said the Eurogroup will reconvene later on Monday to discuss “bridge financing”.

“This [bridge-financing] would involve all the member states, but it’s too early to say how this will go”.

French president Francois Hollande noted: “It’s now necessary to put in place the financing mechanism for the time of the negotiation”.

EB meeting

In the meantime, Greek banks remain closed and capital controls remain in place.

But the ECB, which is providing emergency liquidity assistance [ELA] to Greek lenders, will also hold a board meeting on Monday.

If it opts to raise the ELA ceiling, either on Monday, or following the Greek parliament vote, the pressure on Greek banks will ease.

"The situation in Greece is very tense, so there is a certain interest we advance quickly with further steps”, Merkel said on Monday.

“I have no reason to doubt the timetable”, she added.

Italy defiant on budget on eve of EU deadline

Italy would be committing economic "suicide" if it fell in line with EU rules, its deputy leader has said, in a sign that Rome has little intention of bowing to pressure ahead of Tuesday's budget deadline.

Greek austerity violated right to health, says watchdog

Cuts in the Greek health care system, following the austerity cuts demanded in return for international bailouts, have violated the European Social Charter on the right to health, says Council of Europe's human rights commissioner, Dunja Mijatovic.

News in Brief

  1. US warns EU banks and firms against trading with Iran
  2. Merkel urged Romania not to move embassy to Jerusalem
  3. Protesters call for Czech leader to step down
  4. Former German chancellor labelled 'enemy' of Ukraine
  5. French lead opposition to Brexit deal on fisheries
  6. Private accounts of Danske Bank employees investigated
  7. UK's May defends Brexit deal to MPs, after ministers resign
  8. Brexit MP calls for 'no confidence' vote on May

Stakeholder

An open China brings opportunities to Europe

Some 60 years ago, the first major World Fair after World War II was held in Brussels. Sixty years on, China International Import Expo (CIIE), the first world expo dedicated to expanding imports, will open in Shanghai, China.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. Brexit dominates EU affairs This WEEK
  2. How the EU commission got tunnel vision on self-driving cars
  3. No-confidence calls against May put Brexit deal in doubt
  4. Key points of the Brexit deal (if it ever comes into effect)
  5. Romania heaps scorn on 'revolting' EU criticism
  6. US steps in to clean up Cyprus
  7. 'Decisive progress' on Brexit as British cabinet backs deal
  8. Asylum for Macedonia's ex-PM puts Orban on spot

Stakeholders' Highlights

  1. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  2. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  3. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  4. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  5. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  6. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  7. Mission of China to the EUChina: Work Together for a Better Globalisation
  8. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  9. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  10. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  11. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  12. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future

Join EUobserver

Support quality EU news

Join us