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Christina Vasilaki: The timely completion of the review is a matter of political decisions

The Eurogroup of February 11th agreed that the review can be completed within the time frame set by Athens. However, despite the positive messages, it was made clear that the hard, but necessary decisions are of prime importance for the progress of the review, especially concerning the pension reform and the measures which are about to cover the fiscal gap for 2016. In general, according to EU sources there are still pending issues, besides the pension and the fiscal ones, such as the privatization fund, some pending interventions for the nonperforming loans and some further tax measures. Brussels expressed their readiness to negotiate all these with the Greek authorities in the context of the upcoming visit of the EU institutions’ mission chiefs to Athens, stating nevertheless that it is necessary for Greece to make further steps concerning mainly the pension system’s reforms.

Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, stated, after the Eurogroup meeting, that the implementation of some of the reforms, such as the ones of the pension system, may be difficult at social and political level, nonetheless they are of great importance, implying that a possible delay will not make their implementation easier. He emphasized the fact that the completion of the first review of the new Greek economic adjustment programme before the catholic Easter is absolutely feasible and added that this is what the EU creditors want.

However, a senior Eurozone official had recently stated that, the quality of the agreement is more important for the creditors than the time the agreement will be reached, mentioning that Greece is the one expressing its rush. He also underlined that at this point the technical preparation and the legal editing of all the issues have almost been completed and what still remains is the decision-making.

More specifically, concerning the pension system’s reforms, the same official mentioned that, the aim is the creation of a pension system that will be positive for the formal sector of the economy and that for that purpose a combination of factors is necessary, such as the age of retirement, the pension replacement rates and the pension input period.

The French commissioner mentioned that more discussion concerning the fiscal gap and the ways to cover it is needed, while another official referred a few days ago to the commitment of the Greek government to take measures of about 1% of GDP which have not been specialized, yet. Finally, regarding the privatization fund, it is clear that in order for the first review to be completed, it should start operating, as it is an issue of great significance for many of the Eurozone member-states.

The IMF

The coordinated, non- confrontational image which has been promoted by the European partners was distorted by the Head of the IMF European Department, Paul Tomsen, a few hours after the end of the Eurogroup meeting. In his article-intervention, which emphasized the need for a combination of pension reform and debt relief, he argued among others that, in order to achieve a primary surplus of about 3.5% of GDP in 2018, measures of about 4-5% of GDP (7-9 billion euros) should be adopted. He claimed that they cannot understand how the Greek government can achieve this without decreasing the pension expenditure significantly. In essence, the distance that exists between the IMF and –mainly- the European Commission is related to the fact that the IMF requests further interventions in pensions, not only at structural level, so as to ensure its long-term viability, but also immediate budgetary cuts so as the agreed objectives to be achieved.

However, the possibility of non-participation of the IMF in the Greek rescue package does not currently fall within Brussels’s policy target. According to Eurozone sources, the situation has not changed since the IMF participation is a requirement of many member-states, while the IMF itself has politically committed for that. The European Commission’s Vice President, Valdis Dombrovskis, claimed that the IMF is clearly part of the review process and the collaboration with the other institutions is close. When he was asked to comment on Paul Tomsen’s article, he expressed his firm belief that the IMF will fully participate in the Greek programme, including its financial assistance.