At their meeting in Brussels on Thursday 24 May, the finance ministers of the Eurozone will take stock of Athens' progress in the framework of the fourth and final monitoring mission of the third Greek bailout plan, with the Hellenic Republic to return to financial autonomy from its European creditors in mid-August.
This exchange between Eurozone policymakers follows an agreement reached on Saturday 19 May between Athens and the ‘institutions’ (European Commission, European Stability Mechanism, ECB and IMF) on the package of socio-economic measures that the government of Alexis Tsipras must implement by 21 June, the date of a Eurozone meeting that will be decisive for Greece.
The Commissioner for Economic and Financial Affairs, Pierre Moscovici, welcomed this agreement on Saturday; it will therefore be presented to the Eurogroup. “After so many difficult years, Greece is at last on the home stretch”, he tweeted.
Readers may recall that the June meeting will confirm the end of the third and final Greek financial bailout plan. Aside from the socio-economic reforms already agreed, several points remain outstanding and will be discussed at ministerial level.
For instance, the Nineteen will discuss measures to relieve the Greek debt, particularly the ‘French mechanism’ (‘growth-adjustment mechanism’). This aims to index the level of repayment of the debt to the level of growth in the Greek economy (see EUROPE 11944). There is no question of a haircut on the Greek sovereign instruments held by the Europeans. The final decision on this mechanism, however, will be made at the June meeting.
The discussion on the ‘French mechanism’ is, furthermore, connected to that on the IMF's participation in the Greek bailout via a specific aid plan. This will be conditional on the viability of the Greek debt. “We are in crucial days” on this point, a European source explained on Tuesday 22 May.
A decision of the Washington-based institution is therefore expected in the coming days or weeks.
The exchange will also cover the post-bailout plan supervisory framework, with decisions on this also anticipated for June. Following eight years of tutelage and with a year until its next general elections, Athens intends to return to financial and budgetary autonomy. It refuses to be the first Eurozone country that has had a bailout plan to ask for a preventative line of credit from the ESM, which would be accompanied by new conditional adjustment measures (see EUROPE 11957).
Finally, the ministers will on Thursday discuss the size of the tranche that the creditors will disburse to Athens. Some of this tranche will help the Greeks build up a liquidity buffer to facilitate the country’s return to the sovereign debt markets. Again, the level of the tranche will be agreed upon in June.
It is worth noting that the Eurogroup has still to pay €1 billion to Athens. This envelope, the disbursement of which has already been politically approved, is conditional on the creation of an electronic auctioning system for confiscated goods.
Italy. The economic situation in Italy and the economic programme of the embryonic Italian government is not officially a Eurogroup agenda item. On Tuesday, it was not known whether a minister from the new Italian government, formed by the 5-Star Movement and Lega parties, would attend.
On compliance with the budgetary rules “there are rules, there are also rules for Italy”, the same European source said, pointing out that Italy has used the flexibility offered by the Stability and Growth Pact.
Banking Union and ESM. Discussions will also take place in an inclusive format, to be attended by 27 finance ministers (all except the British minister), on completing Banking Union in the Eurozone and reinforcing the role of the ESM.
According to the same source, technical negotiations are making progress on reducing banking risks, although an agreement at the Ecofin Council of Friday 25 May is uncertain (see other article).
A political agreement in principle of the Council on the ‘risk reduction’ plank would make it easier to take negotiations on the ‘risk-sharing’ plank, i.e. creating a European deposit insurance system (EDIS), off ice.
The ESM, which acts as the permanent bailout fund of the Eurozone, would in particular become the common backstop of the Single Resolution Fund, the financial arm of Banking Union.
Important decisions on the completion of Banking Union are expected at the Eurozone summit at the end of June, if Germany and France reach a compromise in advance.
European Semester and public spending. The European Commission will, moreover, present its spring economic forecast in the framework of the European Semester 2018, published in early May (see EUROPE 12014); the ministers will also discuss the examination of national public spending. (Original version in French by Lucas Tripoteau with Mathieu Bion)