The institutions and the Greek Minister for Finance, Euclid Tsakalotos, on April 22nd briefed the Eurogroup on the state of play in the ongoing first review of Greece’s macroeconomic adjustment programme.
For the review to be completed, the institutions and the Greek authorities should reach an agreement on a comprehensive package of policy reforms to be implemented by Greece. Although significant progress has been made in recent weeks, further work is still needed on a number of policy areas, including fiscal strategy and the privatisation fund. The Eurogroup urged the Greek authorities to swiftly agree with the institutions on the reform package which should also cover issues such as contingency measures and non-performing loans.
In a press release the Eurogroup said that an agreement would be possible in the next few days and, if so, stands ready to reconvene in an extraordinary meeting to agree on the next steps towards the closing of the first review.
Following the Eurogroup meeting, President J. Dijsselbloem made the following statement:
“Cooperation between the institutions and the Greek authorities has been strong and productive, but the institutions will say more about that. We believe that substantial progress has been made, reducing the number of open issues, and getting close to an agreement on a number of key areas such as pension reform, income tax reform, the NPL strategy and the establishment of the privatisation fund. On some issues more work will have to be done to fully conclude that, but we are very close.
Today we also looked at and clarified the way to go forward to bridge the issue which is about insecurity of a forecast and confidence that we can have in the implementation of what has been agreed.
We came to the conclusion that the policy package should include a contingent package of additional measures that would be implemented only if necessary to reach the primary surplus target for 2018. The contingency mechanism needs to be credible, legislated upfront, automatic and be based on objective factors which would trigger these contingent measures.
That needs further work: the design of that, how it would work, what kind of measures there would be and what would trigger it. I’m happy to say that with the commitment of the Greek minister to work on that constructively and as quickly as possible, the institutions have said that they stand ready to work as quickly as possible, in the coming days, on this contingency mechanism. On that basis, if we have the package which needs to be done and delivered upfront, and if we have the contingency package and the mechanism to support that, we can have a further Eurogroup next Thursday. This is not for sure yet, but we are aiming for a meeting next Thursday which would then come to positive conclusions on those two elements, on the upfront package and the contingency package, and have a serious discussion on debt sustainability.
As you know we have a long standing promise which was reaffirmed during the summer agreement, that if necessary and on condition that the Greek government fully delivers on what has been agreed in the programme, if necessary, we stand ready to consider more measures to assure debt sustainability.
Ministers today have given us a mandate to work on that, to make the analysis, and to prepare possibilities within, of course, some limitations. To mention two main ones: there is no support in the Eurogroup for nominal haircuts on the debt, and what we will design and propose needs to stay within the agreement of last summer. So we will look at possibilities of re-profiling and if necessary possible additional measures, looking at maturities and grace periods as outlined in the agreement last summer. And hopefully we will meet again next Thursday to bring those elements all together and come to a political agreement which would be very important for Greece and for the Eurozone.”
Growth and jobs
The Eurogroup continued its exchange of views on national insolvency frameworks and their application, which differ widely in the euro area member states. The discussion was held in line with the 2015 and 2016 Council recommendations to the euro area, issued in the context of the European Semester, the EU’s annual policy coordination exercise.
Well-functioning insolvency frameworks are indispensable for addressing the debt overhang and improving banks’ ability to provide credit to the economy. The issue is particularly relevant for the euro area, as its individual economies are prone to spill-over effects. Ministers agreed on a set of common principles which could serve as guidance for improving these national frameworks. The principles focus primarily on the speed, predictability and cost-effectiveness of the frameworks.
Single Supervisory Mechanism
The Chair of the Single Supervisory Mechanism (SSM), Danièle Nouy, presented the SSM’s annual report.
She also informed the Eurogroup about the ongoing work to harmonise supervisory options and national discretions in the euro area banking sector in order to ensure a more level playing field.
ECB annual report
The European Commission presented the main results of the April 2016 notifications issued by Eurostat in the context of excessive deficit procedure (EDP).
In 2015, government deficits and debt in the euro area stood on average at 2.1% and 90.7% of GDP respectively.
Finance ministers will look further into the fiscal surveillance issue and possible steps under the EDP in the coming months, against the background of the forthcoming 2016 spring forecast by the European Commission and the submission of stability programmes and national reform programmes by the member states in the context of the 2016 European Semester.
PHOTO: The European Union [L-R: Ms Christine LAGARDE, Managing Director of the IMF; Mr Jeroen DIJSSELBLOEM, President of the Eurogroup; Mr Pierre MOSCOVICI, Member of the European Commission.]