Brussels, 24/02/2015 (Agence Europe) - On 24 February, the Eurogroup approved the four-month extension of the financial assistance framework programme for Greece, following the positive assessment, give or take a few nuances, of the three 'institutions' (Commission, ECB and IMF) of the list of reforms submitted on Monday evening by the Greek finance minister, Yanis Varoufakis (see EUROPE 11260).
Following the telephone conference of the finance ministers of the eurozone, which did not last more than an hour, the national procedures to approve this extension may start, the Vice-President of the European Commission, Valdis Dombrovskis, announced via Twitter.
In the joint declaration published after the Eurogroup meeting, the ministers call on Greece to “further develop and broaden the list of reform measures, based on the current arrangement, in close coordination with the institutions in order to allow for a speedy and successful conclusion of the review” mission of the representatives of Athens' creditors. The president of the Eurogroup, Jeroen Dijsselbloem, stressed that this work needed to be wrapped up by the end of April the latest.
Following the ministers' telephone call, Dijsselbloem told the television channel RTLZ that the Greek list was “sufficiently serious to finalise the negotiations in the next four months”.
Commission positive, ECB and IMF less so. In a joint letter to the Eurogroup, Dombrovskis, and the Commissioner for Economic Affairs, Pierre Moscovici, state that the Greek list of measures is “sufficiently comprehensive to be a valid starting point” for a successful conclusion of the final review mission, which is needed for the remaining financial aid under the programme to be disbursed. “We are encouraged by the commitment to combat tax evasion and corruption, inter alia through efforts to modernise tax and customs administrations, as well as to pursue reforms to modernise the public administration”, they write. The Commission notes the commitments in the area of statistics and “considers it of vital importance that the institutional and operational independence of ELSTAT (the Greek office of statistics: Ed) and its senior management be respected at all times”. It also highlights the need for a swift and determined implementation of the reforms.
The director general of the IMF, Christine Lagarde, said that she was encouraged by the strong commitment of the Greek authorities to fight corruption and tax evasion. “In a few areas, however, possibly including the most important ones, the letter contains no clear assurances on the fact that the government intends to undertake the reforms of the Memorandum of Understanding”, she writes. The IMF also notes the absence of a clear commitment to implement VAT and pension reform, or to continue measures to open up sectors which are closed off, administrative reforms, privatisation operations and reforms of the employment market. However, all of these measures are necessary, in the view of the IMF, to be able to say that the underlying objectives of the Greek programme will be met.
The President of the ECB, Mario Draghi, also spoke along these lines, but acknowledged that the new Greek government had had very little time to act. He explains that it seems clear to him that the basis for concluding the review mission is the existing Memorandum of Understanding and the commitments contained within it. “We note that the commitments outlined by the authorities differ from existing programme commitments in a number of areas. In such cases, we will have to assess during the review whether measures which are not accepted by the authorities are replaced with measures of equal or better quality in terms of achieving the objectives”, Draghi said.
Just a first step, Dijsselbloem stresses.”This is just a first list”, there will be much still to do, Jeroen Dijsselbloem told the committee on economic affairs of the European Parliament on Tuesday morning. “I think that they (the Greeks) are very serious in terms of reforms, they have a different political vision, therefore they want some changes within the agreement”, the Dutch Minister explained, adding that the Greek list was not a “new Memorandum of Understanding”, just an indication of the direction the government hopes to take and an opportunity for it to put its political stamp on the programme of reforms.
The President of the Eurogroup explained that he supported some of the ambitions of the new Greek government, particularly in terms of taxation, which will take time to materialise. “It's one thing to pass omnibus laws through the Parliament, another to actually implement those measures”, he said. He stressed that in the meantime, the Greek budget cannot be allowed to go off track, and that a number of short-term measures will be needed. Dijsselbloem went on to say that at this point, he does not know whether a precautionary credit line would be enough to accompany Greece out of the programme, stressing in passing the need to have access to the markets in order for preventative support to suffice. The Minister explained that the Eurogroup would consider other measures to bring the Greek public debt down “if necessary, in other words if the viability of the debt was in danger” (up to 2020-2022) and if the programme has concluded. As for reducing the target primary budgetary surplus for Greece, it will be up to the Commission to see whether these “objectives are realistic given the economic circumstances”. He went on to stress that unilaterally deciding not to comply with the objectives laid down “is not how it's going to work”.
What's on the Greek list. The list of Greek reforms was received by the President of the Eurogroup shortly after 11 pm yesterday. The seven-page list starts with the government's ideas on taxation and refers to a reform of VAT policy, improving tax collection through electronic means, broadening the definition of 'tax fraud and tax evasion', improving legislation on transfer prices and working to create a new tax-compliant culture to ensure that all levels of society pay into the public coffers. The Greeks also hope to establish a database on wealth to assess the veracity of previous years' tax returns. They also plan to increase the independence of the secretariat general of public revenue. The unexpected departure, in June 2014, of Haris Theoharis, then secretary general of this entity, was a cause of concern to the Commission (see EUROPE 11096). The Greek government will also examine the merits of incorporating the financial crimes unit (SDOE) into this Secretariat general. Fighting corruption will also become a national priority. Reference was also made to fighting fuel and tobacco fraud.
The government has also pledged to revise its controls in each sector of public expenditure, to control health care expenditure and rationalise spending, not including payments of salaries and pensions (this expenditure represents 56% of all public spending). They will also reduce the number of ministries (from 16 to 10) and clamp down on the lavish lifestyles enjoyed by ministers, MPs and senior civil servants. The government also hopes to tighten up the legislation on the financing of political parties.
According to this list, privatisations already carried out will not be overturned and those for which a divestiture process is already underway will continue. For all privatisations not yet launched, the Greek government will carry out a revision, to see how it can change them to maximise the long-term benefits to the State. Lastly, the government undertakes to ensure that fighting the humanitarian crisis in Greece will have no negative budgetary effect. (Elodie Lamer)