In an interview with Spanish mass daily “El Mundo”, European Stability Mechanism (ESM) managing director Klaus Regling on Saturday, appeared to backtrack from his initial position regarding a Christmas bonus and other welfare measures for vulnerable groups announced by the Greek premier last week, saying the measure is not expected to affect fiscal targets in 2017 and 2018.
Regling, who is close to Berlin’s positions, said the institutions have concluded that Alexis Tsipras’ announcement last week did cause concern. However, he added that the one-off measures totalling 617 million euros are not expected to significantly change fiscal targets over the coming two-year period.
Regling to El Mundo: “Under the ESM programme, Greece committed to discuss in advance with the institutions all policy measures that potentially affect programme targets and objectives. Also, what to do with any over-achievement of the primary fiscal surplus, which was the case here, must be discussed in advance with the institutions. We were not made aware of these proposals by the Greek government to spend additional fiscal resources for pensions and VAT before they were announced. I hope we can soon return to trust-building cooperative practices. In terms of content, the institutions have now concluded that the announced measures raise significant concerns, but that they are not expected to change significantly the targeted fiscal outcomes in 2017 and 2018. The ESM Member States will now decide what to do”.
After the initial surprise, Eurozone officials mostly expressed annoyance over the fact that the leftist Greek government did not previously consult with creditors over what they called “a spending spree” by Athens, though giving a Christmas bonus to pensioners living below the poverty line, free school meals to hungry children and some relief to the islands that are taking the brunt of Europe’s migration decisions can hardly be called extravagant, indulgent spending.
On the sustainability of the Greek debt Mr Regling said: “I clearly work with the assumption that all the money will be repaid and this is possible with the right policies. When you look at the debt, the overall amount in euros has not changed very much in the last five or six years. The debt ratio has gone up because the GDP collapsed, but the overall debt is about almost the same. What has changed is the composition. Now, half of the debt is owed to institutions that I manage, EFSF and ESM, and we charge very low interest rates and maturities are very long. This is what ESM member states did agree with Greece, in exchange for Greece implementing difficult reforms, fiscal consolidation, financial sector reforms, structural reforms in the labour market, pension reforms. Clearly, there is solidarity in exchange for tough adjustments that the Greek population has to accept.”
Full text of interview in English at www.esm.europa.eu/
