27th Oct 2016

EU to drip-feed Greek treasury

  • Greek finance minister Euclid Tsakalotos (r) with European Stability Mechanism chief Klaus Regling (l). Since the start of the programme last year, Greece has received €28 billion.

Eurozone finance ministers gave their green light on Monday (10 October) to the disbursement of a €1.1-billion tranche of aid to Greece, but said they would wait before releasing another €1.7 billion.

Ministers meeting in Luxembourg took the decision after the European Commission said it considered that the Greek government had fulfilled all 15 requirements to close the so-called first review of the bailout programme launched last year.

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They said that they would wait until the publication of the latest data on clearance of net arrears, due later this month, before authorising the release of the €1.7-billion sub-tranche of aid.

"Greece has made a tremendous job to complete the milestones of the first review,” EU finance commissioner Pierre Moscovici said.

The EU commission's assessment of the latest legislation passed in Athens last week was completed at the last minute, a few hours before the Eurogroup meeting.

The decision to release the €2.8 billion come after a €7.5 billion tranche in June and will in effect close the first review of the programme, almost a year after it had been expected to be closed.

Since the start of the programme in August last year, Greece has received €28.9 billion.

For the review to be completed, Greece had to pass legislations on various areas such as pension cuts, VAT rise, income tax reform, privatisations, reform of the energy sector, repayment of arrears, the recapitalisation and governance of banks, or foreclosures for owners who have failed to repay their loans.

Moscovici said that the measures amounted to savings worth 3-percent of GDP for the period 2016-2018.

The work is "not always simple, not always spontaneous", he noted, but he assured that Greece and its creditors were "building a success story".

The second review, which should start in the coming weeks and will lead to another tranche of aid, will be "more about implementation [of the measures already taken] that hard legislation", the commissioner said.

EU officials expect it to go more smoothly than the first and to be completed before the end of the year.

But all parties in the programme know that there is an elephant in the room: debt relief.

The IMF, which was part of the two first bailouts of 2010 and 2012, is not formally part of the third one. It said it would take a decision before the end of the year, based on whether it considers that Greek debt is sustainable.

Debt relief

The Washington-based institution and EU creditors reached an agreement in May on short and mid-term debt relief, which the president of the Eurogroup, Dutch finance minister Jeroen Dijsselbloem says remains valid.

"I'm not going to open the debt discussion every month. Some are eager to do so, I'm not," he said in Luxembourg.

But on Sunday, the Reuters news agency said that the IMF would not join the programme and would take instead a special advisory status.

The IMF maintains that measures are needed to make the long-term Greek debt sustainable. Others, mainly Germany, have ruled it but says the fund should stay on board.

Other parties say that new talks, which look inevitable, will amount to "squaring the circle" between the fund and Germany.

Growth problem

For some of them, Greece's main problem is not debt but the lack of reforms in the past and of investment now to sustain lasting growth.

"The debt is not sustainable, but it is not a question of percentage [of the GDP], it is a question of growth," a diplomat told EUobserver, pointing out that Greece's competitiveness has plummeted again in the latest World Economic Forum's ranking published at the end of September.

In Luxembourg, both Dijsselbloem and Moscovici pointed out that the Greek economy recorded three consecutive quarters of growth.

But for the diplomat, the figures are deceptive because with weak foreign investment and exports Greece's economy has little reserve for a productive growth and not a catching-up growth.

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