01 April 2014

Eurogroup: Greece funded for next 12 months, hopes to return to markets

The Europgroup issued the following statement on Greece:

The Eurogroup welcomes the conclusion of the fourth review mission under the second macroeconomic adjustment programme for Greece. The Eurogroup reiterates its appreciation for the efforts made by the Greek citizens and notes with satisfaction that the fiscal performance is on track to exceed the programme targets in 2013 and meet them in 2014, allowing Greece to provide additional financing for debt servicing and to undertake some one-off spending in 2014 to bolster social cohesion. Good progress is also being made on structural reforms.

At the same time, the reform process will have to continue in order to enhance the growth potential of the Greek economy by creating job opportunities and a healthy investment environment. In this context, the Eurogroup welcomes the authorities' strong commitment to the implementation of a wide range of product (goods and services) market and institutional reforms. 

The Eurogroup acknowledges the actions and commitments of the authorities to ensure the resilience of the banking sector, which will support the economic recovery. Following the publication of the Bank of Greece's supervisory stress test and asset quality review, two of the four core banks have already successfully raised more than the capital required by the supervisor (under the baseline scenario) fully from private investors. This is an encouraging sign of improving market confidence. We now expect that also the remaining two core banks will raise their capital needs swiftly first and foremost from private investors.

The Eurogroup considers that the necessary elements are now in place to launch national procedures with a view to pave the way for the approval of the next EFSF instalment of €8.3 billion. The instalment is foreseen to be disbursed in three tranches. A first tranche of €6.3 billion is expected to be approved by the EWG and the EFSF's Board of Directors, following the full implementation of the prior actions and finalisation of Member States' relevant national procedures. The disbursements of the second and the third tranches, amounting to €1 billion each, are linked to the implementation of milestones agreed between Greece and the Troika institutions.

The programme is fully financed for the next 12 months, including by drawing on temporary sources of financing such as deposits of general government subsectors.

Full statement

Jeoeren Dijsselbloem remarked after the Eurogroup meeting:

"We are of course pleased that the fourth review can now be drawn to a close. This has been an arduous process but we have now a positive outcome. The Greek government is implementing or is committed to undertake in the near term important reforms that will enhance Greece's growth potential, create job opportunities and spur investment. Subject to the implementation of these reforms, Greece will get €8.3 billion from the EFSF to be disbursed in 3 tranches over the coming months, with a first tranche of €6.3 billion at the end of April that will allow Greece to meet its debt servicing obligations in May and 2 further disbursement of each €1 billion will take place in June and July on the basis of fulfilment of six milestones per tranche.

As I have said before, growth is the only way to get employment figures up and overcome the crisis in a sustainable manner. Therefore we had a discussion on a comprehensive Greek growth strategy. Horst Reichenbach who is leading the task force for Greece joined us in this discussion today. In this, we agreed that we will support Greece in its intention to develop a well-defined growth strategy, complementing the MoU. This strategy should also be the basis to increase effectiveness in the allocation of funds from international financing institutions and the EU structural funds as well as the coordination of technical assistance. Of course, we are still in the early stages of this discussion and we have asked the Greek government to define its growth strategy in the next weeks and months. 

Full statement

Kathimerini reports that a new agreement drawn up by Greece and its lenders foresees that Greece will return to bond markets this year and will not have to take any new austerity measures this year beyond those needed to make up for the reversal of previous cuts ordered by courts. However, the agreement, which was drafted on 28 March sets out a range of commitments that the Greek government has to stick to over the months to come, including a public expenditure freeze and the adoption of a new set of reforms along the lines of the liberalisation measures recommended by the OECD. However, no new austerity measures will be needed of the Greek government can fill any fiscal gaps that emerge as a result of court decisions that reverse previous wage, or other, reductions.

Even before the EU Finance Minister's meeting, Greek Finance Minister Yannis Stournaras insisted in a TV interview with Bloomberg that Greece wouldn't require a third international bailout if its economy continues to revive. As reported by Kathimerini, Stournaras said favorable economic developments will ease bond-market access, with a first issue expected in the first half of the year.

"I think the programme money, along with the better performance on the fiscal side, are enough to cover us fully for the next 12 months, and under certain conditions that could continue up to well inside 2016", he said.

The Wall Street Journal reported Athens hopes to raise $5.5 billion to $6.9 billion in Greece's first long-term bonds sale since their bailout. Greece would issue a bond with a maturity of between three and five years, according to Stournaras. 

Two days after the Eurogroup summit, however, the Greek government was rocked by the resignation of one of Prime Minister Antonis Samaras’s closest aides, Panayiotis Baltakos, who was forced to step down on Wednesday after a video posted on the Internet showed him apparently accusing the premier of trying to influence a prosecutors' investigation into neofascist Golden Dawn, triggering a political storm, reports Kathimerini.

© European Union