During the last meeting of the finance ministers of the Eurozone, which took place in Brussels on Monday (February 17) the troika expressed its desire to return to Athens, in order for the new round of negotiations with the Greek authorities to start as soon as possible. The representatives of the lenders eventually secured the commitment of the Greek government to quickly proceed with the agreed reforms in “key-areas”, which are a precondition for their return to Athens.
As Jeroen Dijsselbloem, Head of the Eurogroup, pointed out after the meeting, “the fact that the mission is bound to revisit Athens is definitely a positive step, but it is no guarantee of agreement by itself”, whereas he referred to issues that still need “a lot of work”. In the same spirit, the vice president of the Commission, Olli Rehn, added that “the ball is in the Greek court”, while repeatedly reiterating that “the Greek government must focus on the structural reforms it has committed itself to, as well as on achieving the fiscal objectives for 2014 and 2015, in order to finalize the agreement at the technical level before the Eurogroup of March 10”.
The time for the completion of the current evaluation is counting down, as the need for timely disbursement of an amount that will be sufficient to cover the maturities of the bonds of May (worth around € 9 bn.) is pushing for an agreement no later than March 7, as the Greek finance minister stated. According to Mr. Stournaras, we are dealing with a dual amount, i.e. the sum due for 2013 and the first installment of 2014. Earlier in the day, the general director of the European Stability Mechanism, Klaus Regling, talked about a remaining € 10,1 bn. in the fund for the Greek programme which are “on hold until the completion of the evaluation”; however, none of the speakers made a commitment for the disbursement of the full amount, neither did anyone explain which needs it is bound to cover and until when. A few days earlier, a senior official of the Eurozone had stated that new borrowing needs will arise by August in order for particular bonds to be repaid, which will apparently be covered after a new evaluation during the summer.
Primary surplus
Commissioner Rehn acknowledged that the outcome of the Greek fiscal adjustment process has been far more positive than anyone would have expected, thus leaving little doubt this time as to whether the Eurostat will confirm the primary surplus. Nevertheless, he said that it would be preferable if a solution to the funding gap had been found back in December 2013, which was not possible though due to the lack of progress by Greece.
On his part, the Greek minister, Yiannis Stournaras, noted that the two sides are now close to an agreement. After admitting that certain reforms are indeed overdue, he did not wish to specify the exact amount of the primary surplus, but rather stressed that this is a “pleasant kind of anticipation”. Moreover, he clarified his expectation that the European partners will deliver on their promises for initiating the debate both on the funding gap directly after the completion of the evaluation, and on the sustainability of the debt directly after the publication of official data on the surplus by the Eurostat on April 23.
Earlier, however, the Head of the Eurogroup had stated on his arrival at the meeting that the discussion regarding the funding gap, the possible third Greek aid package and the sustainability of the debt may be deferred until the summer. “There is absolutely no reason to hurry,” he said.
The backlog
According to the Greek minister, Greece has already fulfilled 78% of its commitments to structural reforms, whereas the most essential pending issues are the reduction of insurance levies by 3,9%, certain taxes towards third parties and the bulk of ΟΕCD’s “toolbox”. As far as the request of the troika for collective dismissals, Mr. Stournaras stressed that the minister of employment, Ioannis Vroutsis, has filed a draft plan where the relevant EU regulations are adopted.
Eurogroup “plus” and the ECOFIN
Both the Eurogroup “plus,” which followed the first meeting of the Eurozone finance ministers, and the planned meeting of the ECOFIN of 18 February, were accompanied with many discussions and tentative steps towards reaching a compromise with the European Parliament, with regard to the single regime of consolidation and liquidation of banks.
The EU finance ministers offered Yannis Stournaras, within his capacity as chairman of the Council, the necessary flexibility needed for continuing consultations with the representatives of MEPs, with the aim of reaching a final agreement. In order for the banking union to be realised and for the new rules on bank rescue and liquidation to be put into practice, the two sides must reach a compromise before the last plenary session of the EP in mid-April, i.e. before the body is dissolved because of the European elections.
The key points that divide the member-states on the one hand, and the European Parliament on the other, rest on the decision of the Council in December 2013 to set up and operate a bank resolution fund under an intergovernmental agreement and outside of the European institutions, as well as on how “common” this fund is bound to be and by when.
The compromise that seem to be emerging between the two sides will include the maintaining of the intergovernmental agreement, given that member-states indicate no willingness to make retreats on this particular issue, accompanied by significant backtracking on the part of the 28, regarding the issues of fund pooling and simplification of the procedure to activate the mechanism. In other words, it seems that the involvement of member-states will be significantly limited in terms of decision-making concerning when a bank is to be placed under the resolution or liquidation regimes; moreover, various alternative options will be considered, so as to set up a credible resolution fund that will be able to provide the European banking system with enough credit to ensure its safety.
Deposit Guarantee Schemes
During the last Council, the agreement between the European Parliament and member-states, regarding the guaranteed deposits of up to € 100,000 and enhanced protection of small depositors against economic shocks, was formally approved. According to the directive in question, in case of liquidation of a bank, depositors with up to € 100,000 are now guaranteed their repayment within 20 days.