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Christina Vasilaki: Next tranche to cover Greece’s €8.8 billion financing needs to be released in May

The council of the finance ministers of the Eurozone, which took place on March 10, 2014, was concluded with recommendations to Greece for a quick settlement of pending issues and completion of the ongoing assessment before the end of the week.

According to the statement of the President of the Eurogroup, Jeroen Dijsselbloem, after the end of the meeting, “open fronts still exist between the Troika and the Greek authorities on the financial, banking and structural reforms levels”, although he did not wish to go into any further details. “It is mainly the Greek government’s responsibility to complete the mission the as soon as possible”, he stressed. In any case, both Jeroen Dijsselbloem and the vice president of the European Commission, Olli Rehn, stressed that “progress has been made in negotiations”, which thus allows us “to be cautiously optimistic” with regard to reaching an agreement by the end of the week.

Regarding the critical issue of Greek banks’ stress tests, the head of the Eurogroup underlined that “the Bank of Greece is exclusively responsible for conducting these stress tests”, highlighting, however, that the Greek banks are going to be evaluated in autumn, according to the same criteria set for the rest of the banks of Europe. Moreover, he welcomed the fact that two systemic Greek banks have turned to the markets for their recapitalization, for an amount that exceeds the requirements set by the recent stress tests.

Finally, the head of the European Stability Mechanism (ESM), Klaus Regling, pointed out that the exact amount of the tranche and the schedule of disbursement have not yet been decided upon, given their direct dependence on the outcome of the mission to Athens. He also reminded that another € 10.1 bn have yet to be disbursed from the Stability Mechanism .

Notably, in mid-May Greece will be called upon to repay maturing bonds of about €8.8 bn, which it will receive from its creditors when -and provided that- the current assessment ends in a positive way.

On his part, the Greek finance minister commented that he does “not know exactly how much the installment will be and how it is going to be disbursed, but it will definitely cover our financing needs for May”. However, there is not much time –as various European officials have often pointed out, the disbursement procedure cannot begin until the assessment has been ratified by the Eurogroup of 1st April in Athens or, as a last resort, by the Eurogroup working group, a prospect which however has yet to be verified by the head of the Eurogroup.

As far as the open fronts of the negotiation are concerned, these are to be summarised as follows:

–          Implementation of 100% of reforms regarding the toolbox of the OECD and particularly those concerning the duration of fresh milk and the disposal of non-prescription drugs in super-markets.

–          Change of the law on collective redundancies, which continue to be an issue of debate following the proposal of the labour minister, Giannis Vroutsis, towards the Troika, which includes no legislative regulation.

–          A series of minor issues related to employment, such as the reduction of social security contributions by 3.9% -the Troika insists that this is applicable only for employers’ contributions- as well as the revision of legislation on strikes.

–          Removal of certain taxes in favour of third parties.

–          The fiscal gap in 2014, which the ministry of finance insists does not exist.


ECOFIN: No agreement at the ministerial level with regard to the continuation of negotiations on the Single Resolution Mechanism

The ECOFIN of 11th March concluded its work without reaching an agreement, although the Greek presidency received a renewed mandate to negotiate. Giannis Stournaras, presiding over the council of the finance ministers of the EU, described discussions within the council as “extensive and difficult”, whereas he recognised that the compromising proposals of the Greek presidency were not accepted in their entirety. However, the decision was made that he and Jeroen Dijsselbloem visit Strasbourg on the following day, in order to meet with the negotiating team of the European Parliament and the European Commission and reattempt to achieve convergence of their positions.

Time is exerting increasingly more pressure, given that all parties have declared their wish to realise the European banking union before the current composition of the European Parliament reaches the end of its term, i.e. mid-April and its last plenary session. Mr. Stournaras excluded the possibility of even considering a special meeting of the ECOFIN before the coming Summit, namely 20-21 March 2014.

The Greek minister underlined that “the outcome of negotiations will depend on the political will of the parties involved”; nevertheless, the situation does not seem to be making any progress, as the European Parliament seems to be insisting on its decision not to proceed to a “not-good agreement”, whereas at the level of the Council conflicting positions still exist.

The two basic “thorns” in the negotiations are related to the second pillar of banking union, namely the Single Resolution Mechanism, as follows:

–          The time of capitalisation and mutualisation of the Single Resolution Fund. The European Parliament wishes to mutualise the fund’s resources after the first three years of its existence, whereas the initial position of the Council referred to a full capitalisation and mutualisation within 10 years, as well as to the existence of national sub-funds. The proposal to accelerate their consolidation has been accepted, although some member-states wish to speed up the fund’s capitalisation as well, a proposal that smaller countries with a weaker banking sector are unable to accept.

–          The decision-authority for proclaiming a bank problematic. The initial proposal of the Council directly involves member-states in this procedure, which has been rejected by the European Parliament; the latter insists that the decision has to be made by an independent authority, the Resolution Council; similarly, the European Central Bank should be the only one responsible for closing down a bank. A clause of “public-interest” may be the key to this compromising proposal, i.e. the Council may be able to intervene in cases of emergency.