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Christina Vasilaki: Brussels’ “go-ahead” for the disbursement of the €1 bn. tranche

Brussels’ “go-ahead” for the disbursement of the €1 bn. tranche

The Eurogroup of 7th July approved the tranche to Greece worth €1 bn., along with its disbursement by the Management Board of the Hellenic Financial Stability Fund (HFSF) within the current week. After the disbursement, the total amount of financial support to Greece by the HFSF will reach €140.9 bn. Moreover, the HFSF will disburse an additional €1 bn., provided that the additional prerequisites are implemented. Following the next disbursement, €1.8 bn. will remain available for the Greek programme until the end of the year.

The President of the Eurogroup, Mr. Jeroen Dijsselbloem, expressed his satisfaction at the completion of the six prior actions that had been decided upon in April 2014, while conveying the assertion of the Greek Finance minister towards his counterparts that the Greek government will meet the six last prerequisites associated with the tranche of June, which amounts to €1 bn., by early August.

Nevertheless, he did not omit to emphasise that the obligations of Greece arising from the memoranda are not restricted solely to the fulfillment of the prerequisites, while alluding to a “reform fatigue” of the Greeks. According to a senior government official, the input of Mr. Mario Draghi, President of the European Central Bank, was characterised by a similar tone, as he seemed uneasy in light of a possible relaxation of the reform efforts in the country.

The Greek Finance minister responded to these allegations, underlining that the government has not relaxed but rather sped up its efforts, pointing to the hardest one among the second prerequisites package, namely “small DEI” (national electricity provider), which “is bound to be concluded within the week”, according to the minister.

In addition, Mr. Dijsselbloem announced that the technical team of the troika is expected to visit the country later this week, in order to assess the progress of the Greek programme. In fact, he made clear that the fifth and last assessment will officially begin when all prerequisites of the fourth assessment have been satisfied.

The abovementioned government official, who travelled to Brussels in order to attend the meeting, also indicated that “the aim of Greece on this occasion is to avoid another assessment that will last for months; instead, it should be ready by October, in order to pave the way for decisions concerning the sustainability of the Greek debt.

As far as the possibility of a third programme of support is concerned, after the end of the year when the Greek programme will have been concluded, the official mentioned that the Greek prime minister has ruled out any such possibility; nevertheless, within the troika itself various views exist regarding this issue. Moreover, distancing himself from the government proclamations of “the end of memoranda”, the official explained that the end of the financing programme does not necessarily entail the end of monitoring. “Only if we repay 75% of our loans will monitoring cease and we are trying to push it as far back as possible”, he said characteristically.

Reduction of taxes on labour income

After the end of the meeting, the President of the Eurogroup made clear that the Finance ministers intend to adopt measures towards reducing the tax burden on labour, as a means of tackling unemployment. According to Mr. Dijsselbloem, this is a structural reform that will boost competitiveness, whereas the member-states will decide how they will compensate for the revenue losses. Asked about whether these reforms can be implemented in memorandum countries as well, Siim Kallas, Vice President of the Commission and responsible for economic policy, said that “the shift of taxation in other sectors, such as pollution or consumption, or even the reduction of spending while there is still room for this, are all measures that can mitigate the cost of labour, without the economies of the Eurozone deviating from the road of fiscal adjustment. The Commission undertook to prepare a guide-report on best practices during the coming autumn, whereas the member-states will decide whether to proceed to the reduction or not.

According to a government source, the Greek government has already moved on to the reduction of taxes on labour income by 5%, although it remains at levels higher than the European average and additional measures of further reduction have to be taken. “This cannot be done directly, however, because pension funds have been under notable strain and Greeks are not capable of enduring additional taxes”, he said.

Socialists request more flexibility

The issue of flexibility of the rules for financial stability, which has been at the centre of discussions in the post-election period, particularly under the encouragement of the Socialist governments of the Eurozone, was not thoroughly discussed in the Eurogroup. When asked, however, Mr. Dijsselbloem commented that there is already enough flexibility, “in terms of both prevention and correction”.

Moving on with his remarks, J. Dijsselbloem pointed out that the member-states are able to secure more time, only when they implement economic reforms with a positive impact on the state budget. “We want to see them implementing the reforms, rather than contending themselves to promises”, he said in a forceful manner while underlining that the European Commission is empowered to evaluate the implementation of reforms.