Brussels, 04/07/2014 (Agence Europe) - The Eurogroup is expected at its meeting on Monday 7 July to give the go-ahead for disbursement of €1 billion of aid for Greece.
A videoconference on Friday 4 July between national experts of the EU Council of Ministers allowed the countries of the eurozone to note that progress has been made in implementing the six milestones required for the end of May and which are needed for payment of the aid. A high-ranking European official said that the Eurogroup on Monday would give the nod for the payment, which would then take place later in the week.
The official said the authorities were working on the second set of milestones, introduction of which is required for a second batch of €1 billion and “the hope is that they should be completed by the end of this month”. When will the second billion be paid? “That depends on fulfilment of milestones technical mission as of mid-July in order to prepare the ground for the fifth review”, he explained.
The troika of lenders (European Commission, European Central Bank and International Monetary Fund) will send a group of experts to Athens in a week's time to pave the way for the full assessment team, which will probably be sent in September. One of the key questions for the assessment mission (the fifth) will be reducing the Greek debt burden, as promised by the eurozone in November 2012. The head of the Eurogroup explained last month (see EUROPE 11105) that three criteria have to be met before the debt burden can be reduced, namely a primary budget surplus (already achieved), meeting the budget targets and the reforms laid down in the bailout plan and, thirdly, there has to be a clear need to reduce the debt burden.
Stability and Growth Pact. The flexibility in the stability and growth pact is not officially on the agenda for the Eurogroup on Monday. It is an issue that has been back and forth between Italy and Germany since Italy took over the rotating presidency of the Council of the EU from Greece on 1 July (see EUROPE 11113). The high-ranking official said there would not be any formal discussion of the SGP until after the summer break. It would be discussed, he said, when member states submit to the European Commission their draft budget for 2015 before 15 October, which is supposed to include social and economic policy recommendations set out by the European summit for the member states, and also in December during debate on the European Commission's report on application of the “two-pack” and “six-pack” of legislation to tighten budget discipline in the eurozone.
Commenting on the war of words (see related article), the official said that the views of the two sides (the ones calling for strict application of the budget rules and those wanted a more balanced application of the rules in order to stimulate economic recovery) were “more consensual in reality than people would like to believe”.
On Monday, the eurozone finance ministers will begin looking in detail at the social and economic recommendations for the eurozone (see EUROPE 11092) and will start with the question of the taxation of labour with a view to reducing the tax wedge in order to encourage job creation.
A third of member states (Austria, Belgium, Spain, France, Italy, Latvia, Lithuania, the Czech Republic and Romania) have reduced the tax wedge and increased indirect taxation, said EU Taxation Commissioner Algirdas Semeta last month, adding that the average tax on labour in the eurozone was higher than the average for the OECD. The talks will continue at another Eurogroup meeting on Friday 12 September.
Banking Union. The chair of the ECB's supervisory board, Danièle Nouy, will inform ministers about preparations for the ECB becoming the eurozone bank supervisory body on 1 November. It will directly supervise 128 big eurozone banks and is currently carrying out an asset quality review of the banks, which will be followed by bank stress tests by the European Banking Authority (EBA).
Nouy may react to the comments by BaFin, the German bank regulatory body, that the methodology and deadlines for the bank tests are too tight and therefore undermining quality. The Ecofin Council on Tuesday 8 July will discuss the methodology for deciding how much member states' bank resolution schemes must contribute to the eurozone's bank resolution fund (SRF).
The Eurogroup will discuss preparations for Lithuania's joining the euro on 1 January 2015 following the European summit's approval in June (see EUROPE 11110). (MB and EL)