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19 March 2014

Troika statement on the review mission to Greece - Greek coalition aims to secure next bailout tranche


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After seven months of negotiations, teams from the EC, ECB and IMF have reached staff-level agreement with the authorities on policies that could serve as the basis for completion of the review. The Eurogroup and the IMF are expected to consider approval of the review in the coming weeks.


The mission and the authorities agreed that the economy is beginning to stabilise and is poised for a gradual resumption of growth, broadly in line with our previous projections. Prices are adjusting and inflation remains well below the euro area average.

Fiscal performance is on track to meet programme targets. Preliminary estimates suggest the 2013 primary balance target was met with a substantial margin. While only a small portion of this over-performance will carry over into 2014, we believe that the 2014 fiscal targets will also be met, taking into account the measures being implemented and planned. The authorities reconfirmed their commitment to implement policies needed to achieve the 2015 primary surplus target of 3 percent of GDP, including as needed by extending expiring fiscal measures, such as the solidarity surcharge.

The authorities are making progress on structural reforms to improve the growth potential and flexibility of the Greek economy and help create a fairer and more supportive environment for investment, growth, and job creation. They are committed to implementing a very large majority of product market reforms identified by the recent OECD study in the areas of food processing, tourism, building materials, and retail; to taking concrete measures to liberalise the transport and rental markets and open up closed professions; and to reducing social security contribution rates and nuisance taxes. Notwithstanding delays, progress is also being made in reforms of the public administration, which should reduce the burden of red tape and improve the quality of public services to the Greek people. Labour market reforms are behind schedule, but the authorities are committed to implementing them gradually in the remainder of 2014. Competitiveness will be further enhanced by energy market reforms, such as the rationalisation of pricing policies to ensure adequate cost recovery and avoid hidden subsidies, the split of the Public Power Company into two entities ahead of privatisation, and the launch of a fundamental reform of the gas market. The authorities also agreed to revitalise the privatisation of other corporate and real estate assets, which would provide needed financing to the state while unlocking investment.

Alongside these structural reforms, the authorities are continuing their efforts to strengthen the social safety net to cushion the impact of the economic downturn. Notably, programmes to hire youth and unemployed workers under programmes financed by EU structural funds will be expanded, and a minimum income guarantee programme is being launched on a pilot basis in two municipalities with the aim of rolling it out on a phased-in national basis in 2015.

The authorities are committed to taking all necessary actions to ensure that banks remain healthy and adequately capitalised and are in a position to support the economic recovery. We take note of the stress test results and attendant capital needs estimates by the Bank of Greece. However, according to the assessment of the mission teams, there are upside risks to the capital needs estimates, in particular, if the authorities and banks do not urgently and efficiently address the high level of non-performing loans. Swift recapitalisation of banks will strengthen their balance sheets. The envisaged injection of fresh private capital into the Greek banks is a sign of confidence and will help to strengthen the private management of Greek banks. The Bank of Greece should remain vigilant in its oversight of the banking system and proceed forcefully in requiring banks to quickly work out their large stock of problem assets. The authorities are also committed to significantly strengthening the private sector debt resolution framework and facilitating the orderly and swift workout of impaired bank assets. The buffers in the Hellenic Financial Stability Fund will be retained to meet future adverse contingencies.

Press release


The Greek government now has to prepare legislation for the reforms agreed with its lenders, in the hope that the disbursement of at least €10 billion in loans will be approved at an informal Eurogroup meeting due to take place in Athens on April 1. Prime Minister Antonis Samaras confirmed that social security contributions would be reduced by 3.9 percentage points.

Samaras called the agreement “a fresh start . . . after a long period of tribulation”. “It provides important significant structural changes that will liberalise the economy, increase competitiveness and reduce prices", he said. “We’re talking about reforms that have already happened in other European countries and should have happened years ago in Greece. This foot-dragging has been overcome for good.”

Samaras is due to meet Deputy Premier Evangelos Venizelos at the Maximos Mansion on Wednesday to discuss the coalition’s next steps. Government sources said that the two leaders must decide whether the reforms Athens agreed to will be legislated in one multi-bill or if several draft laws will be submitted to Parliament. The coalition aims to pass the measures before the end of the month so eurozone finance ministers can approve the release of the next tranche on April 1. It is not clear how much will be disbursed, though. Greece has a maximum of €11 billion to receive from the eurozone and €3.6 billion from the International Monetary Fund.

Kathimerini understands that Greece agreed to adopt 75 per cent of the 329 liberalisation measures recommended by the OECD. Another 15 per cent will be adapted to the specifics of the Greek market, while the remaining 10 percent have been put off for now.

Heralding the deal with the Troika during a televised news conference, Samaras repeated his pledge to give a portion of a projected primary surplus to Greeks on low incomes. “More than €500 million will be given immediately to 1 million Greeks", he said, noting that members of the police and security services on monthly salaries below €1,500 would benefit.

Another €20 million would go toward the growing ranks of the country’s homeless, Samaras said, adding that the state would pay an additional €1 billion in debts to suppliers than it had originally budgeted for this year, while a further €1 billion would go toward reducing the country’s debt.

Greece has calculated its primary surplus for this year at €2.9 billion but its size is to be confirmed by the European Union’s statistics service Eurostat in April. After that, Greece will be able to distribute the promised handouts. Another €350 million from the surplus is to go toward plugging a gap in the country’s social security funds.

"Today a long period of tribulations has ended, and a new beginning is being made", Samaras said.

Full article © Kathimerini

VP Rehn

Rehn hailed the staff level agreement between the Greek government and the Troika. Fiscal performance was on track to meet agreed targets and important structural reforms have been agreed to improve Greece's economic flexibility, said Rehn. He added that the agreement was also expected to strengthen the safety net for the more vulnerable members of Greek society while an expansion of employment programmes via EU structural funds would lead to the creation of jobs.

Investors were showing an increased interest in Greece, noted Rehn, who stressed that private productive investment would be the key driver of sustainable growth and job creation. “Overall it is clear today that Greece is turning the corner", said Rehn, who added that this was “good news not only for Greek people but for all Europeans".

Full article © Kathimerini


There was strong demand for a €500 million bond launched on Tuesday by Piraeus Bank, the biggest Greek lender, with institutional investors and hedge funds placing orders worth more than €3 billion. It was the first such issue by a Greek bank in almost five years.

Further reporting © Financial Times (suscription)



© European Commission


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