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Christina Vasilaki: Euro Summit: Realistic compromise for timely restoration of liquidity

While time is running out concerning cash balances, the Greek government returned to Athens after the two-day Euro Summit of March with explicit guidelines on its next moves, whose direct implementation shall result in the immediate resolution of liquidity problems facing the country in the medium term. In the eight-party, mini marathon summit among major stakeholders, which was asked for by Prime Minister Alexis Tsipras in order to discuss the Greek issue at the highest political level, the scene was set for stakeholders’ movements in the coming days. The aim is to secure the much needed liquidity of Greece.

According to European sources, the Greek Prime Minister attended the meeting along with Chancellor A. Merkel, French President F. Hollande and the heads of the European institutions amidst a suffocating deadline of a few days. During the latter, money should start pouring into the public funds, so as for the country to be able to meet its obligations. The discussion will focus on three basic demands: a) to release part of the pending tranche worth €7.2 bn., b) the ECB should allow the extension of the threshold for the acquisition of Treasury bills by Greek banks under its supervision, and c) to waive the blockade of Greek government bonds as collateral for financing the banks.

Following strict messages upon their arrival which hampered Greek hopes for a political decision, as well as their decision to invite the Eurogroup president, Jeroen Dijsselbloem, without prior notice of the Greek Prime Minister, the three-hour meeting was completed essentially reiterating the Eurogroup decision of 20th February. According to the latter, any future disbursement requires technical agreement on a comprehensive Greek reform plan between Greece and the institutions. Nevertheless, the informal announcement of an extraordinary Eurogroup on Greece (possibly even on Friday, 27 March) through the joint statement at the end of the meeting, made clear that the intention of an immediate, early disbursement exists. Of course, Greece is required to demonstrate the necessary willingness to cooperate, while even the “hard block” acknowledges the impossibility of completing the planning, evaluation by the institutions and legislation of a comprehensive adjustment programme within one week. In other words, the main stakeholders that participated in the mini Summit decided not to punish the Greek government for the valuable time that has been lost -in their opinion- since late February. On the contrary, they declared their willingness to carry on with an early disbursement, while even shifting towards more realistic expectations.

Therefore, the Greek government is expected to submit -in the coming days- a list of concrete and costed reforms to be implemented immediately. Upon its positive review by the so-called Brussels Group, the much needed liquidity shall be restored – although only little by little. It will most likely refer to the release of €1.9 bn. in profits from Greek bonds held by the central banks, which the Greek government insisted on mentioning in the joint statement and which, however, was denied by Germany.

Α. Tsipras: there is no short-term liquidity problem

For his part, the Prime Minister assured after the Summit that his country will be able to fully meet its direct financial obligations. “In the short-term, no liquidity problem exists,” he said emphatically and affirmed that both wages and pensions, as well as debt liabilities, will be paid in full at the end of the month. “Bank deposits are fully safeguarded,” he stated while clarifying that all problems that have arisen stem from the inability of previous governments to implement their commitments towards our partners.

According to Mr. Tsipras, the political negotiation that took place at the highest political level in Brussels was the key to bringing the agreement “back on track”.

Conditional Misunderstandings and the €2 bn. package

After an “exhaustive two days,” the Prime Minister appeared satisfied and pointed out to reporters the fact that the package of detailed reforms shall be worked out exclusively by Greece, thus signaling the end of recessionary measures listed in the so-called “Hardouvelis e-mail” (i.e. the former Finance Minister). Moreover, he referred to his face to face discussions with Chancellor Merkel and the French President Hollande, both of whom assured the Prime Minister that there is no longer a question of a “fifth assessment,” while both leaders desire the submission of proposals with a positive financial outcome.

However, Angela Merkel opted for a much less conciliatory attitude in face of German reporters, noting that “Greece has to respect every single paragraph of the agreement of 20th February,” while at the same time asserting her intention not to make any concessions. This “creative misunderstanding” refers to whether the structural reforms to be implemented immediately, which the Greek Prime Minister committed to undertaking, will indeed suffice to replace measures of direct financial benefits.

Far from the package of €2 bn. itself, which shall be drawn from European funds in order to combat unemployment and to tackle poverty, the assumption made by the head of the Commission, Jean-Claude Juncker, that Greece is in fact experiencing a “humanitarian crisis” was interpreted as a victory of the Greek government. In particular, Alexis Tsipras commented thereupon saying that this is an extremely important move for two reasons. Firstly, because the humanitarian crisis has been acknowledged at the highest political level, which is not the result of a natural disaster but rather of specific measures of European origin implemented in Greece. Secondly, because these funds are bound to offer essential support, thus paving the way to healing these wounds and boosting the growth rate.

“The humanitarian crisis is severe,” said Jean-Claude Juncker during the presentation of the package. “A country in such a situation needs additional help and the resources therefore are available in the European budget. They amount to approximately €2 bn. for 2015,” he said stressing that “this money will not be used to fill Greece’s coffers, but to create growth and social cohesion in Greece”.

According to Mr. Juncker, Commission Vice-President Valdis Dombrovskis shall coordinate the team that will assist Greece in taking full advantage of available funds. In other words, the Task Force which is based in Athens shall work together with the Greek Task Force, so as for available resources to be utilised in the best possible manner.