Monday

27th May 2019

Greece and creditors break bailout deadlock

  • "There is a light at the end of the austerity tunnel," said EU finance commissioner Pierre Moscovici (r). (Photo: Council of the EU)

The Greek government agreed on Monday (20 February) to make new reforms to cut up to 2 percent of GDP in spending in the coming years.

Greece accepted budget cuts worth up to €3.6 billion that it had previously refused as the only way to break the deadlock with its creditors in talks to unblock a new tranche of the €86 billion bailout programme agreed in 2015.

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

  • The Greek parliament will have to adopt new reforms before a new tranche of aid is unblocked. (Photo: EUobserver)

Experts from the creditor institutions - the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund (IMF) - will be able to go back to Athens and prepare reforms on tax, pensions and the labour market with the Greek government.

All parties hope that a so-called staff level agreement will be reached in time for eurozone ministers to close the second review of the programme and allow a new loan disbursement at their next Eurogroup meeting on 20 March.

The ministers at a Eurogroup on Monday sugar-coated the Greek concessions by offering the prospect of unspecified "growth-enhancing measures" if the new reforms created "fiscal space" from 2019 onwards.

Eurogroup president Jeroen Dijsselbloem said the decision signalled "a shift of emphasis in the policy mix, from the austerity side, much more to structural reforms". But he gave no details of the supposed shift.

In Athens, government spokesman Dimitris Tzanakopoulos portrayed it as a “decisive victory” for Greece, because "any [austerity] measure taken will be offset by another measure of a similar amount".

He insisted that there would be "not a single euro of additional austerity”.

But the reality is more nuanced.

"There is a light at the end of the austerity tunnel," EU finance commissioner Pierre Moscovici said at a press conference after the meeting. But he insisted that reforms must be done first and that potential future growth-friendly measures should be budget neutral.

The budget cuts were needed to close the second review, while the "offset" measures could only be agreed on principle and voted later.

'To the liking of the IMF'

"The Greek government can already prepare those measures, legislate those measures if they want," Dijsselbloem told journalists. But he insisted that "all depends on the size of the reforms" that Greece will have to agree first, and whether it continues to meet the fiscal targets set by the bailout memorandum for the coming years.

"I can never promise the end of austerity," Dijsselbloem said.

The size of the new reforms, and whether they are sufficient for creditors to close the review, will also depend on the IMF, which has threatened to pull out of the bailout if reforms fail to make the Greek debt sustainable.

The Washington-based fund has been saying for months that more structural reforms were necessary in order to secure Greece's fiscal targets and reduce the cost of the debt.

Europeans and Greeks had been saying that the target - a 3.5 percent of GDP primary budget surplus "in the medium term" after 2018 - could be reached thanks to Greece's growth and budget surplus since 2015.

Last week, EU commission vice-president Valdis Dombrovskis pointed out that "the IMF has very pessimistic macroeconomic and fiscal projections. There is a gap between our figures and theirs".

Dijsselbloem admitted on Monday that "what we have agreed to now is to the liking of the IMF".

'Too early to speculate'

In a statement issued later, the IMF said that it was "too early to speculate about the prospect for reaching staff level agreement" during the forthcoming expert mission in Athens.

"More progress will be needed to bridge differences on other important issues," it said, referring to the Greek debt and what "medium term" means when it comes to setting the fiscal targets.

The question of how long Greece is required to reach a 3.5 percent surplus after the end of the programme in 2018 was left open when the bailout was agreed in 2015. But it is crucial now because the longer Greece has to meet that target, the more cuts the IMF will ask.

Europeans and IMF could agree on a three-year period.

"We want to make it so that it is more realistic," Dijsselbloem noted.

Creditors put more pressure on Greece

Eurozone finance ministers demand the Greek government adopt new austerity measures for the future or risk the end of the bailout programme.

Opinion

Lenders seek to undermine Greek workers' rights

As focus turns to negotiations between Greece and lenders over a new loan package, both the European Commission and the International Monetary Fund seem determined to press for further reforms, undermining trade unions, workers' rights, and collective bargaining agreements.

Greek bailout talks to 'intensify'

Greece and its creditors will meet in Brussels later this week to unblock negotiations needed for a new tranche of financial aid, amid concerns over the country's economic situation.

Opinion

New model needed to save EU

The challenges and threats to the European Union are all reflected in the Greek case.

Eurogroup makes 'progress' on Greek deal

Eurozone ministers endorsed an agreement in principle between the Greek government and its creditors over a new package of reforms. But talks on fiscal targets and debt could still block a final agreement.

News in Brief

  1. Russia-critical banker elected president of Lithuania
  2. Timmermans calls for 'progressive alliance'
  3. Catalonia's Puigdemont wins MEP seat
  4. Weber opens door to alliance with greens and liberals
  5. Tsipras calls snap Greek election after EP defeat
  6. Polish ruling party PiS takes lion's share of EU vote
  7. Romanian voters punish ruling PSD party
  8. First official EP projection: EPP remain top, Greens fourth

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  2. Nordic Council of MinistersEducation gets refugees into work
  3. Counter BalanceSign the petition to help reform the EU’s Bank
  4. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  5. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  6. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  7. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  8. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  9. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  10. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  11. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  12. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic commitment to driving global gender equality
  2. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  3. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  4. Nordic Council of MinistersNordic talks on parental leave at the UN
  5. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  6. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  7. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  8. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  9. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  10. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  11. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  12. Nordic Council of MinistersNordic ministers take the lead in combatting climate change

Join EUobserver

Support quality EU news

Join us