Greece secured a four-month extension of its financial rescue on Tuesday when its euro zone partners approved a reform plan, as Athens made a commitment to a prudent budget.
European finance ministers sealed the decision in a telephone conference convened by Eurogroup chairman Jeroen Dijsselbloem after Athens sent him a detailed list of reforms it plans to implement by the end of June.
The agreement, to be ratified by some national parliaments in the coming days, averted an imminent banking meltdown and a potential state bankruptcy for now, but tough negotiations lie ahead soon over the country’s longer-term economic future.
A Greek finance ministry official said Greece would start discussions immediately with its EU and IMF partners on meeting this year’s financing shortfall. Options include allowing Athens to issue more short-term t-bills and using ECB profits on Greek bonds.
IMF Managing Director Christine Lagarde said the reform plan was “not very specific”, and much clearer assurances would be needed on key reforms of pensions, taxation and privatisation.
The Greek proposals:
- The Greek government pledged not to reverse completed privatisations
- To ensure that social welfare measures for the most disadvantaged sections of the population will have ” no negative fiscal effects”.
- The Greek government proposes to improve tax enforcement, fight corruption and “review and control spending in every area of government spending”.
The Commission is satisfied
Commissioner Pierre Moscovici sent on Tuesday a letter to the President of the Eurogroup, Jeroen Dijsselbloem, on the Greek government’s reform proposals, saying that in the view of the Commission, this list is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review as called for by the Eurogroup at its last meeting.
“We are encouraged by the commitment to combat tax evasion and corruption, inter alia through efforts to modernise tax and custom administrations, as well as to pursue reforms to modernise the public administration. The Commission also notes the commitments in the area of statistics and considers it of vital importance that the institutional and operational independence of ELSTAT and its senior management be respected at all times” the letter stated.
Further specification of the reforms in these and other key areas is expected to be provided and agreed before the end of April, in line with last week’s Eurogroup statement. The Commission will work with the new administration to transform these ‘statements of intent’ into clear policy actions.
The Commission underlines its willingness to continue to provide technical assistance in key areas to assist in the design and implementation of policies.