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Nikos Chrysoloras: A Summit of Timetables

In anticipation of the formation of government in Germany, the European Summit, as expected, failed to reach substantive decisions on any of the issues on its agenda. Nevertheless, during a meeting held in light of the allegations of wire-tapping European leaders by the U.S. intelligence services, the participants agreed on a clear decision making timetable in the coming months.

More specifically, in order to manage migration flows, which were the basic topic of interest for Greece, the European Council called on the newly created Task Force for the Mediterranean “to identify priority actions for the most efficient use of European policies and tools in the short term”. The Commission was asked to submit concrete proposals, so that “operational decisions are made”, based on the findings of the Task Force with regard to the issue of immigration, by December 5. Moreover, the European Council pledged “to return to asylum and immigration issues, within the context of a broader and longer-term policy outlook in June 2014, when strategic guidelines for further legislative and operational planning will be defined”. The fact that European leaders decided to strengthen the activities of the European Agency for the Management of Operational Cooperation at the External Borders of the Member States of the European Union (FRONTEX), especially in Southeastern Mediterranean, is a positive development for Greece.

Timetables were also set for the economic issues discussed at the summit. More specifically, the European leaders invited the ECOFIN and the European Parliament “to issue the Directive on bank recovery and resolution and the Directive on deposit guarantee schemes by the end of the year”. They also committed themselves to agreeing to the proposal of the European Commission for the Single Resolution Mechanism until the end of the year, “so that it can be approved before the end of the current parliamentary term”. We ought to recall that Berlin considers that the transfer of responsibility for the liquidation of European banks to the European Commission, as proposed, is contrary both to German and European law.

Of equal significance to Greece is European leaders’ affirmation that direct recapitalization of banks by the European Stability Mechanism will be made possible, without this money being included in the debt of the States concerned. By using this tool, our country is hoping to alleviate part of the public debt, which was created due to the loans offered to Athens in order to recapitalize its banks. The European leaders called upon Eurogroup “to complete the guidelines for the immediate recapitalization through the European Stability Mechanism (ESM), so that by the time that the Single Resolution Mechanism (SRM) is ready, the ESM will be able to directly recapitalize banks”.

Important decisions with regard to the establishment of a special “Eurozone budget”, which will provide support to member-states in order to implement structural reforms, were referred to December. Through this tool, Greece is expecting additional funding, in the context of close economic policy coordination in the Eurozone. As mentioned in the European Council Conclusions: “to promote strong, sustainable and inclusive economic growth in the Euro area, the coordination of economic policies needs to be further strengthened, notably by increasing the level of commitment, ownership and implementation of economic policies and reforms in Euro area Member States… Work will continue to strengthen economic policy coordination, with the objective of taking decisions in December on the main features of contractual arrangements and of associated solidarity mechanisms”.

In addition, European leaders committed themselves to making the new financial instruments of the European Investment Bank available by the beginning of 2014, through which the EIB will bear part of the risk of loans to small businesses. In this way, it is estimated that the credit crunch conditions prevailing in the Greek market will be eased, given that Greek commercial banks are suffocating under the weight of ever-increasing, non-performing loans. “The European Council reiterates its call to expand joint risk-sharing financial instruments between the Commission and the European Investment Bank (EIB) to leverage private sector and capital market investments in SMEs, with the aim of expanding the volume of new loans to SMEs across the EU… The new instruments should begin operating in January 2014 to accompany recovery, fight unemployment and reduce fragmentation in the initial years of the financial framework”.

Furthermore, the European Council reiterated that member-states should have finalized, by the end of the year, plans to use the resources of the Program in Youth Employment, worth 6 billion. The challenge for Greece is to design these programs in time to begin disbursements from January 2014, given that youth unemployment exceeds 60% in the country. Finally, the completion of the single digital market has been postponed by the leaders for 2015, disappointing thus those who expected significant economic benefits from addressing the phenomenon of the current space fragmentation.

The Greek Program

With regard to the implementation of the Greek adjustment program, the Summit totally confirmed the Crisis Observatory’s previous correspondence, i.e. that radically different estimates between the Troika and the Greek economic staff could develop into a major political problem for the government. The effort of Athens to “politically negotiate” the request of the Troika for additional measures, in order for agreed objectives of the 2014 budget to be achieved and for the current assessment of the adjustment program to unfreeze, came up against a brick wall, as is indicated by information from member-states, the European Commission and the technocrats of the Eurogroup (EWG). After all, the statement by German Chancellor Angela Merkel after the Summit was typical: “We had a five minute meeting with the Greek Prime Minister, on the sidelines of the meeting of the European People’s Party. We did not discuss the details of the program. The position of the German government remains unchanged”. In other words, the German government has referred the Greek request to not take additional measures to the technocrats of the Troika, while sources in Berlin are saying that “it does not fall within the Chancellor’s authority to indicate what measures the Troika should take and how the agreed and Memorandum-recorded objectives should be achieved. This unyielding attitude forced Athens to retreat, and while the Greek government continues to support its position of not taking new horizontal measures, now the emphasis is more on the word “horizontal” rather than on the “measures”.

We ought to recall that the Troika has calculated the financial “gap” in the 2014 budget somewhere between one and two billion Euros. However, according to the Finance Ministry in Athens, this amount makes it de facto necessary to take “horizontal” measures, which is politically impossible and economically counterproductive and unnecessary. The Greek government has counter-suggested structural measures worth 500 million Euros. If the Troika does not accept this counter-proposal, then “we are going to have a problem”, said Yannis Stournaras, the Greek Finance Minister, from Brussels. To conclude, it should be noted that resumption and completion of the evaluation of the Troika are pre-conditions, necessary to pave the road for the tough decisions Europeans need to take concerning the funding gap in the Greek programme from the summer of 2014 onwards.