Greece Set to Send Draft Reforms to EU Institutions
ATHENS (Financial Times) - Greek finance minister Yanis Varoufakis was due to send draft proposals to International Monetary Fund and EU institutions on Sunday outlining a set of reforms that would meet conditions laid out in Friday’s eleventh-hour deal to extend the country’s €172bn rescue program for four months.
The reforms would be "mainly of a structural nature” and would not include details of projected revenue increases or spending cuts, a government official said.
Athens would spell out measures to crack down on tax evasion and fuel and cigarette smuggling that could raise about €2bn-€2.5bn this year, according to the same official.
But it was unclear whether some key economic policies already unveiled by the Syriza government, such as haircuts of up to 50 per cent on taxpayers’ debts to the state, would be included in Mr Varoufakis’s letter.
Even though Greece’s deal with its eurozone partners marked a U-turn by Alexis Tsipras, the prime minister, who pledged during last month’s election campaign to kill the current bailout, the government’s approval rating rose to 80 per cent from 70 per cent a week ago. According to an opinion poll published on Sunday.
Mr Tsipras on Saturday told Greeks that austerity imposed by the EU and IMF was over but warned that although Athens won a battle in Brussels on Friday, it had not won the war.
He said Friday’s agreement cancelled the austerity commitments made by a previous conservative-led government but warned of difficult times ahead.
"We proved that Europe stands for mutually beneficial compromises — not for doling out punishments.” he said on Saturday. But Friday’s deal was not the end of the negotiations.
"We will be entering a new, more substantive stage in our negotiations until we reach a final agreement to transition from the catastrophic policies of the Memoranda, to policies that will focus on development, employment and social cohesion,” he said.
The deal, reached at a make-or-break meeting of eurozone finance ministers on Friday night, left several important issues undecided — particularly what reform measures Athens must adopt in order to get €7.2bn in aid that comes with completing the current programme.
Officials said if the Greek proposals were not adequate another eurogroup meeting could be called on Tuesday.
Critically, Friday’s agreement committed Athens to the "successful completion” of the current bailout review, something the new Greek government has long vowed to avoid. "As long as the program isn’t successfully completed, there will be no payout,” said Wolfgang Schنuble, the German finance minister.
Still, the agreement avoids what eurozone officials feared would be market turmoil if the bailout had expired at the end of next week and should stem the mounting deposit withdrawals from Greece’s banking sector, which officials said were reaching close to €800m a day, creating a situation at risk of becoming a full-scale bank run.
"[The negotiation] was intense because it was about building trust between us,” said Jeroen Dijsselbloem, the Dutch finance minister and eurogroup chairman who brokered the deal after failing twice before over the course of the past week. "Tonight was a first step in this process of rebuilding trust. As you know, trust leaves quicker than it comes.”
We proved that Europe stands for mutually beneficial compromises — not for doling out punishments
As the news emerged late on Friday, Wall Street climbed to record highs and the euro rallied. The S&P 500 index rose 0.6 per cent to a record 2,110, while the Dow Jones hit an all-time peak of 18,144.
The decision to request an extension of the current programme is a significant U-turn for Mr Tsipras, who had promised in his election campaign to kill the existing bailout.
It also leaves the IMF and EU institutions — the European Central Bank and European Commission — in control of evaluating Greece’s economic reform measures and the disbursement of bailout funds, despite Mr Tsipras’s vow to rid Greece of the hated troika of bailout monitors.
Although Athens has made a commitment to continue running primary budget surpluses — taking in more than it spends, when interest on debt is not counted — Mr Dijsselbloem said that Greece may be able to lower those surplus targets, a key demand made by Athens and the most significant concession the Greek government won in the talks.
"We managed to avert a series of many years of suffocating primary surpluses that our economy cannot produce,” Mr Varoufakis said.
Left unresolved was when the first bailout payments would be released to Athens. Although the agreement mandates the two sides reach an agreement on economic reform measures by April, officials said the Greek government risked running out of cash as soon as next month.
One senior official involved in the talks said the rapidly deteriorating fiscal position put pressure on Athens to cut a deal. "Their backs are against the wall,” said the official.
ECB officials also said they were now open to resuming normal lending to Greek banks — funds the lenders need to run their day-to-day operations and ensure cash is available to meet withdrawals — but officials said it could be several weeks before such a decision was taken.
Earlier this month, the ECB cut off such lending, forcing banks to rely on more expensive Emergency Liquidity Assistance from the Greek central bank. An ECB official said normal lending would only start again after "we assess that there is a great likelihood of a positive conclusion of the program”.
Despite speculation among Greek bankers that capital controls were close to being imposed on Greece to prevent massive deposit flight, the ECB official added that the extension deal made such a move unnecessary. "Capital controls are out of the question,” the official said.
Athens would spell out measures to crack down on tax evasion and fuel and cigarette smuggling that could raise about €2bn-€2.5bn this year, according to the same official.
But it was unclear whether some key economic policies already unveiled by the Syriza government, such as haircuts of up to 50 per cent on taxpayers’ debts to the state, would be included in Mr Varoufakis’s letter.
Even though Greece’s deal with its eurozone partners marked a U-turn by Alexis Tsipras, the prime minister, who pledged during last month’s election campaign to kill the current bailout, the government’s approval rating rose to 80 per cent from 70 per cent a week ago. According to an opinion poll published on Sunday.
Mr Tsipras on Saturday told Greeks that austerity imposed by the EU and IMF was over but warned that although Athens won a battle in Brussels on Friday, it had not won the war.
He said Friday’s agreement cancelled the austerity commitments made by a previous conservative-led government but warned of difficult times ahead.
"We proved that Europe stands for mutually beneficial compromises — not for doling out punishments.” he said on Saturday. But Friday’s deal was not the end of the negotiations.
"We will be entering a new, more substantive stage in our negotiations until we reach a final agreement to transition from the catastrophic policies of the Memoranda, to policies that will focus on development, employment and social cohesion,” he said.
The deal, reached at a make-or-break meeting of eurozone finance ministers on Friday night, left several important issues undecided — particularly what reform measures Athens must adopt in order to get €7.2bn in aid that comes with completing the current programme.
Officials said if the Greek proposals were not adequate another eurogroup meeting could be called on Tuesday.
Critically, Friday’s agreement committed Athens to the "successful completion” of the current bailout review, something the new Greek government has long vowed to avoid. "As long as the program isn’t successfully completed, there will be no payout,” said Wolfgang Schنuble, the German finance minister.
Still, the agreement avoids what eurozone officials feared would be market turmoil if the bailout had expired at the end of next week and should stem the mounting deposit withdrawals from Greece’s banking sector, which officials said were reaching close to €800m a day, creating a situation at risk of becoming a full-scale bank run.
"[The negotiation] was intense because it was about building trust between us,” said Jeroen Dijsselbloem, the Dutch finance minister and eurogroup chairman who brokered the deal after failing twice before over the course of the past week. "Tonight was a first step in this process of rebuilding trust. As you know, trust leaves quicker than it comes.”
We proved that Europe stands for mutually beneficial compromises — not for doling out punishments
As the news emerged late on Friday, Wall Street climbed to record highs and the euro rallied. The S&P 500 index rose 0.6 per cent to a record 2,110, while the Dow Jones hit an all-time peak of 18,144.
The decision to request an extension of the current programme is a significant U-turn for Mr Tsipras, who had promised in his election campaign to kill the existing bailout.
It also leaves the IMF and EU institutions — the European Central Bank and European Commission — in control of evaluating Greece’s economic reform measures and the disbursement of bailout funds, despite Mr Tsipras’s vow to rid Greece of the hated troika of bailout monitors.
Although Athens has made a commitment to continue running primary budget surpluses — taking in more than it spends, when interest on debt is not counted — Mr Dijsselbloem said that Greece may be able to lower those surplus targets, a key demand made by Athens and the most significant concession the Greek government won in the talks.
"We managed to avert a series of many years of suffocating primary surpluses that our economy cannot produce,” Mr Varoufakis said.
Left unresolved was when the first bailout payments would be released to Athens. Although the agreement mandates the two sides reach an agreement on economic reform measures by April, officials said the Greek government risked running out of cash as soon as next month.
One senior official involved in the talks said the rapidly deteriorating fiscal position put pressure on Athens to cut a deal. "Their backs are against the wall,” said the official.
ECB officials also said they were now open to resuming normal lending to Greek banks — funds the lenders need to run their day-to-day operations and ensure cash is available to meet withdrawals — but officials said it could be several weeks before such a decision was taken.
Earlier this month, the ECB cut off such lending, forcing banks to rely on more expensive Emergency Liquidity Assistance from the Greek central bank. An ECB official said normal lending would only start again after "we assess that there is a great likelihood of a positive conclusion of the program”.
Despite speculation among Greek bankers that capital controls were close to being imposed on Greece to prevent massive deposit flight, the ECB official added that the extension deal made such a move unnecessary. "Capital controls are out of the question,” the official said.