Greece commits itself to remaining on the path of reforms, in light of Eurogroup
The finance ministers of the Eurozone were faced with the assurances of the new finance minister of Greece, Mr. Gikas Hardouvelis, that Greece will meet its commitments to the Eurogroup, during their Brussels meeting on Thursday. “We will meet the six prerequisites of May before the end of June, as well as the prerequisites of June before the summer holidays, so that the two installments amounting to €2 bn. are paid in August”, Mr. Hardouvelis told the reporters following the meeting, indicating that another €1.8 bn. from the SMPs should be included, namely the profits arising from the bonds possessed by the central banks of Europe. The new finance minister also referred to his personal initiative to refer to the process of filling the position of general secretary of public revenues, after the resignation of Mr. Theocharis. “I pointed out that it will be better for Greece when this process is transparent and open, without political interference”, he said characteristically.
On their part, the European partners appeared worried at first, regarding a possible reform “fatigue” of Greece, with the Commissioner for Economic and Monetary Affairs, Mr. Olli Rehn, stating upon his entrance to the meeting, that “Greece should return to the path of credibility in relation to the reforms”. Mr. Hardouvelis, nevertheless, appeared particularly reassuring towards his peers and, as indicated by the head of the Eurogroup, Mr. Jeroen Dijsselbloem, when asked about whether the new finance minister of Greece discussed his intentions to reduce all kinds of tax rates with his peers, “absolutely nothing relevant was brought up”. Moreover, as far as the possible room for renegotiation of particular measures or parts of the agreement with the troika, Mr. Dijsselbloem and Commissioner Rehn stressed that they were unaware of such developments, given that no such claims have been made, whereas it is important for Greece to proceed with the measures which have been already agreed upon.
In contrast to the rigor of Mrs. Rehn and Dijsselbloem, the German finance minister, Mr. Wolfgang Schäuble, followed a prominently supportive argument: “Greece started from an especially challenging point and its progress in recent years has been extraordinarily great, much greater than anyone would expect. We ought to show some respect for the fact that Greece is forced -rather too often- to make decisions which are very difficult to promote domestically”, he said upon entering the Eurogroup, while also anticipating that “given that Greece sticks to the path of the previous years without wavering, the country shall move on in spite of all the Cassandras”.
On the other hand, as far as the debate on debt relief is concerned, the head of the Eurogroup underlined that three conditions have to be met in order for it to proceed: “the primary surplus -which has already been accomplished- the fulfillment of all conditions and reforms which have been agreed upon -which is markedly delayed- and the establishment of whether such a discussion is truly indispensable, which remains to be inferred during the next assessment”.
What are the prerequisites?
The six prerequisites for May:
- Adoption of the law on outdoor trade;
- Abolition of third party taxes;
- Establishment of framework for tackling corruption in the public sector;
- New programme for collecting overdue debts;
- Reduction of profit margin of pharmacists and ensuring access of uninsured citizens to health services, and
- Adoption of law on the framework for licensing and spatial planning.
The six prerequisites for June:
- Consolidation of all supplementary public funds and integration with the unified supplementary fund of the private sector;
- Privatisation of DEI (Public Power Corporation of Greece) with a parallel settlement of government debts to the business;
- New framework for financing political parties after scrutiny of their assets and funds sources;
- Adoption of Forest Law;
- Introduction of legal framework to reduce bureaucracy, and
- Elimination of third party taxes for financing the supplementary funds.
Klaus Regling: no room for further cutting interest rates.
On his part, Mr. Regling, head of the European Stability Mechanism, ruled out any possibility that the organisation could further reduce interest rates for Greece in the context of debt relief, during the annual press conference/ assessment of the organisation.
“There is absolutely no room for reducing the ESM’s interest rates for Greece. The ESM already lends money without gaining any profit, thus a further reduction would mean that it loses money that needs to be drawn from somewhere else – mainly from the budget of the member-states, which have no appetite for this”. Regarding the maturity extension of bonds, he said this could be done although it is not being discussed at the moment. “Whether there is room for interest rate cuts, these will be made in bilateral loans to Greece. All these issues are bound to be discusses in the autumn”, said Klaus Regling.
Finally, the head of the ESM added that Greece has saved €8.6 bn. this year due to low interest loans from the EFSF, which shall be repeated in the coming years. He stressed, however, that in his opinion “the markets reduced interest rates very fast, without them having ruled out the possibility of regression”.
The IMF analysis
In response to a reporter’s question, Christine Lagarde, who also participated in the Eurogroup -in light of the IMF consultation for the euro area, under Article IV of the Fund- stated that the financing needs of the country for the next 12 months shall be reevaluated after completion of the stress tests of the Greek banking sector. “After determining the remaining sum of the €10 bn. of the EFSF, this might be used to cover the financing gap”.
With regard to the general economic situation in the Eurozone, the IMF representative expressed the Fund’s concerns about continued low inflation, while stressing the great need to restore growth and employment -especially for the youth- in all countries of the euro area.