Luxemburg.- (GreekNewsOnline, ANA-MPA)
The government is happy with the agreement reached by the Eurogroup, Finance Minister Euclid Tsakalotos said from Luxembourg following the Eurogroup that approved Greece’s final review and debt relief measures early on Friday.
“We can return to the markets,” he said. “This government will never forget what the Greek people went through these last eight years. The Greek people must be able to see the results very soon.”
Tsakalotos added that the immediate gain for Greece was the extension of the loan repayment maturity period by ten years and the cash buffer.
“Development will not be for the few but for the many, and this is the promise of the Greek government,” Tsakalotos said.
“A new day dawns for the Greek people, the era of loan memoranda is over,” National Defence Minister Panos Kammenos said early on Friday in a tweet.
Eurogroup statement on
conclusion of ESM program
The Eurogroup congratulated the Greek government and the Greek people for the successful conclusion of the ESM program and noted the importance of continuing the reforms.
In an official statement following a meeting that began on Thursday afternoon, the Eurogroup said among other things that it also welcomed “the finalization of a comprehensive growth strategy by the Greek authorities.”
The implementation of an ambitious growth strategy and of prudent fiscal policies will be the key ingredients for debt sustainability, it said, and added that the enhanced surveillance procedure would be activated by the European Commission “in the coming weeks”.
Among other issues, the Eurogroup also reaffirmed their confidence in the TAIPED (Greek privatization agency) committee of experts and the president and senior staff of ELSTAT (the Greek statistical service), who are facing legal proceedings, and reaffirmed their “commitment to support Greece in its reform efforts to return to sustainable growth.”
The full text of the statement
The Eurogroup commends the Greek authorities for the completion of all the agreed prior actions of the final review of the ESM programme. We congratulate the Greek authorities and Greek people for the successful conclusion of the ESM programme. The Eurogroup acknowledges the significant efforts made by the Greek citizens over the last years. Greece is leaving the financial assistance programme with a stronger economy building on the fiscal and structural reforms implemented. It is important to continue these reforms, which provide the basis for a sustainable growth path with higher employment and job creation, which in turn is Greece’s best guarantee for a prosperous future.
The Eurogroup welcomes the commitment of the Greek authorities to continue and complete all key reforms adopted under the ESM programme and to ensure that the objectives of the important reforms adopted are safeguarded. We also welcome the finalization of a comprehensive growth strategy by the Greek authorities. This strategy, which aims at enhancing Greece’s long-term growth potential and improving the investment climate, underlines the Greek ownership of the reform process following the ESM programme. The Eurogroup further welcomes the signature of a ‘Cooperation and Support Plan’ between the Greek authorities and the European Commission’s Structural Reform Support Services, which provides the continued provision of technical assistance to support reform implementation in the coming years.
The Eurogroup returned to the sustainability of Greek debt on the basis of an updated debt sustainability analysis provided by the European institutions. The implementation of an ambitious growth strategy and of prudent fiscal policies will be the key ingredients for debt sustainability. In this context the Eurogroup welcomes the commitment of Greece to maintain a primary surplus of 3.5% of GDP until 2022 and, thereafter to continue to ensure that its fiscal commitments are in line with the EU fiscal framework. Analysis of the European Commission suggests that this will imply a primary surplus of 2.2% of GDP on average in the period from 2023 to 2060.
The Eurogroup recalled the assessment of debt sustainability with reference to the agreed benchmarks for gross financing needs: GFN should remain below 15% of GDP in the medium term and below 20% of GDP thereafter while ensuring that debt remains on a sustained downward path.
The Eurogroup stressed the importance of basing its assessment on realistic and cautious assumptions, taking into account compliance with the EU fiscal framework and the impact of growth enhancing reforms and investment initiatives.
The Eurogroup agreed to implement, in addition to the short-term debt measures already in place, the following medium-and long-term debt measures in order to ensure that the agreed GFN objectives are respected also under cautious assumptions.
The abolition of the step-up interest rate margin related to the debt buy-back tranche of the 2nd Greek programme as of 2018.
The use of 2014 SMP profits from the ESM segregated account and the restoration of the transfer of ANFA and SMP income equivalent amounts to Greece (as of budget year 2017). The available income equivalent amounts will be transferred to Greece in equal amounts on a semi-annual basis in December and June, starting in 2018 until June 2022, via the ESM segregated account and will be used to reduce gross financing needs or to finance other agreed investments.
The two measures mentioned above are subject to compliance with policy commitments and monitoring, as outlined below.
A further deferral of EFSF interest and amortization by 10 years and an extension of the maximum weighted average maturity (WAM) by 10 years, respecting the programme authorized amount.
We agreed that based on a debt sustainability analysis to be provided by the European institutions, the Eurogroup will review at the end of the EFSF grace period in 2032, whether additional debt measures are needed to ensure the respect of the agreed GFN targets, provided that the EU fiscal framework is respected, and take appropriate actions, if needed. The Eurogroup will take into account a positive assessment in the post programme surveillance, particularly in the fiscal area and economic reform policies.
In this context, for the long term, the Eurogroup also recalled the May 2016 agreement on a contingency mechanism on debt which could be activated in the case of an unexpectedly more adverse scenario. If activated by the Eurogroup, it could entail measures such as a further re-profiling and capping and deferral of interest payments of the EFSF to the extent needed to meet the GFN benchmarks defined above.
The Eurogroup stressed that debt relief measures should include incentives to ensure a strong and continuous implementation by Greece of the reform measures agreed in the programme. To ensure the market credibility of the package of debt measures, we agreed that policy commitments related to the programme will be linked to the return of SMP-ANFA income equivalent amounts as well as to the abolition of the step-up interest rate margin up to 2022. In this context, the Greek authorities have made specific policy commitments, as set out in the annex, to complete key structural reforms initiated under the ESM programme (including commitments to complete actions whose implementation is not fully in the hands of government) against agreed deadlines and made a general commitment to continue the implementation of all key reforms adopted under the ESM programme.
The Eurogroup welcomes the intention of the European Commission to activate the Enhanced Surveillance procedure in the coming weeks and also the support for this approach by the Greek authorities. The quarterly reports under Enhanced Surveillance will enable closer monitoring of the economic, fiscal and financial situation and the post programme policy commitments and will serve as a basis for the Eurogroup to agree on the return of SMP-ANFA income equivalent amounts and the cancellation of the step-up interest margin on EFSF.
We recalled that the ongoing legal proceedings against the members of the Committee of Experts (CoEx) of TAIPED are a matter of very serious concern and we reaffirm our full confidence in the work of the experts, which was also confirmed by the Hellenic Court of Auditors. Preoccupations also concern the proceedings against the former President and senior staff of ELSTAT, notably as regards the alleged falsification of fiscal data. The Eurogroup continues to have full confidence that the data validated by Eurostat and delivered by ELSTAT since 2010, including the 2009 general government balance outturn, is in compliance with the rules that are applied in all Member States. The Eurogroup mandates the institutions to continue monitoring the developments in those cases and the supporting actions taken by the Greek authorities, including legislative actions if needed, for instance strengthening the independence of ELSTAT, in full respect of the independence of the judiciary, and report back to the Eurogroup in the context of the post programme surveillance.
Subject to the completion of national procedures, the ESM governing bodies are expected to approve the disbursement of the fifth and last tranche of the ESM programme amounting to EUR 15 bn. Out of this total amount, EUR 5.5 bn will be disbursed to the segregated account, to be used for debt servicing and EUR 9.5 bn will be disbursed to a dedicated account set up to build up cash buffers, to be used for debt service in case of needs. Such an account will be subject to appropriate safeguards and any possible future utilization of its funds for an efficient debt management will be agreed by the Greek authorities with the ESM/European institutions. Overall, Greece will be leaving the programme with a sizeable cash buffer of EUR 24.1 bn covering the sovereign financial needs for around 22 months following the end of the programme in August 2018, which represents a significant backstop against any risks.
The IMF management welcomed the successful implementation of the ESM programme and the further specification of the debt measures given today by Member States. Although the Fund’s own Stand-By Arrangement (SBA) can no longer be activated, the IMF confirmed its continued involvement in Greece in the post-programme surveillance framework alongside the European Institutions.
Finally, we also reaffirmed our commitment to continue to support Greece in its reform efforts to return to sustainable growth.
STATEMENTS OF EU – IMF OFFICIALS
The Greek debt is sustainable going forward, Eurogroup President Mario Centeno said at a press conference following the group’s marathon meeting in Luxembourg that began on Thursday afternoon and ended early on Friday.
Centeno hailed the agreement and noted that Greece has fulfilled all 88 prior actions necessary for the completion of its fourth and final program review. He said that in total, Greece implemented over 450 reforms, many of which were painful to the Greek people.
According to Centeno, the 10-year extension on the repayment period for EFSF loans, and the 10-year grace period, will allow Greece to return to the markets successfully.
He said that the IMF will take part in Greece’s post-program surveillance. The country will exit the program with a cash buffer of 25 billion euros, “covering needs for the next 22 months.”
“We can safely say Greek debt is sustainable going forward,” he said, adding that in the European Union “all adjustment programs are behind us.”
“This is an exceptional, a historic moment,” European Finance Commissioner Pierre Moscovici said in Luxembourg early on Friday, at a press conference hailing Eurogroup agreement on Greece’s adjustment program following a marathon session.
Moscovici said that the decision on the program was a result of Greece’s assumption of responsibility and the Eurozone’s solidarity.
He recognized the sacrifices of the Greek people, but said they were necessary. The package of measures on debt sustainability is credible and will prove effective, because it will be accepted by the markets, he asserted.
Moscovici said there would be no new program for Greece, but enhanced surveillance, as foreseen by the European laws.
Europrean Stability Mechanism (ESM) Managing Director Klaus Regling called the Eurogroup agreement on Greece “a historic moment” for Greece and the Eurozone, at a press conference following the Eurogroup meeting in Luxembourg early on Friday morning.
Regling noted that the Eurozone had lived through critical times, and he hailed the solidarity shown to Greece. “It is the biggest solidarity the world has ever seen,” he said.
European Commission President Jean-Claude Juncker welcomed the Eurogroup agreement on Greece’s last loan tranche and debt relief measures early on Friday, through Twitter.
In his tweet, Juncker said, “Eurogroup agreement paves way for successful conclusion of the programme and a new chapter for the country. I will always fight for Greece to be at the heart of Europe. I pay tribute to the Greek people for their resilience and European commitment. Their efforts were not in vain.”
IFM Managing Director Christine Lagarde said at a press conference following the Eurogroup early on Friday that she shares the sense of European officials that the agreement on Greece’s program is a historic moment.
The statement is as follows:
“We commend Greece and its European partners on the completion of the fourth and final review under the European Stability Mechanism (ESM) program. The additional debt relief measures announced today will mitigate Greece’s medium-term refinancing risks and improve its medium-term debt prospects, both of which are very welcome results. This will be good for Greece and good for the euro area.
“We also take note of the commitment by Greece’s European partners to keep debt sustainability under review and to take additional debt relief measures if needed. This would provide important safeguards if the more optimistic long-run macroeconomic assumptions of the European institutions were not realized.
“We will examine the sustainability of Greece’s debt in the course of our upcoming Article IV Consultation with Greece, which starts next week.
“While time has clearly run out to enter into a Stand-by Arrangement, we will remain fully engaged in supporting Greece in sustaining its economic recovery and achieving more robust growth in the post-program period. IMF engagement will include post-program monitoring, which has been used in other similar cases, notably Cyprus, Ireland and Portugal.”