Eurogroup Welcomes Agreement On Greek Policy Package

by Ulrika Lomas, Tax-News.com, Brussels

23 February 2012

The Eurogroup of EU Finance Ministers has issued a statement welcoming the agreement reached with the Greek government on a policy package constituting the basis for the EUR130bn (USD172bn) bailout programme, which is conditional on Greece finding another EUR325m in budget savings.

It has also welcomed the provision of assurances by the leaders of the two coalition parties regarding the implementation of the programme beyond the forthcoming general elections.

According to the Eurogroup, the new programme provides a comprehensive blueprint for putting the public finances and the economy of Greece back on a sustainable footing and hence for safeguarding financial stability in Greece and in the euro area as a whole.

While fully aware of the significant efforts already made by the Greek citizens, the Eurogroup underlined that further major efforts by the Greek society are needed to return the economy to a sustainable growth path.

The Eurogroup stated: “Ensuring debt sustainability and restoring competitiveness are the main goals of the new programme. Its success hinges critically on its thorough implementation by Greece. This implies that Greece must achieve the ambitious but realistic fiscal consolidation targets so as to return to a primary surplus as from 2013, carry out fully the privatisation plans and implement the bold structural reform agenda, in both the labour market and product and service markets, in order to promote competitiveness, employment and sustainable growth.”

“To this end, we deem essential a further strengthening of Greece’s institutional capacity. We therefore invite the Commission to significantly strengthen its Task Force for Greece, in particular through an enhanced and permanent presence on the ground in Greece, in order to bolster its capacity to provide and coordinate technical assistance.”

It added: “The Eurogroup also welcomes the stronger on site monitoring capacity by the Commission to work in close and continuous cooperation with the Greek government in order to assist the Troika in assessing the conformity of measures that will be taken by the Greek government, thereby ensuring the timely and full implementation of the programme.”

“The Eurogroup also welcomes Greece’s intention to put in place a mechanism that allows better tracing and monitoring of the official borrowing and internally-generated funds destined to service Greece’s debt by, under monitoring by the Troika, paying an amount corresponding to the coming quarter’s debt service directly to a segregated account of Greece’s paying agent.”

“Finally, the Eurogroup in this context welcomes the intention of the Greek authorities to introduce over the next two months in the Greek legal framework a provision ensuring that priority is granted to debt servicing payments. This provision will be introduced in the Greek constitution as soon as possible.”

It continued: “The Eurogroup acknowledges the common understanding that has been reached between the Greek authorities and the private sector on the general terms of the PSI exchange offer, covering all private sector bondholders. This common understanding provides for a nominal haircut amounting to 53.5%.”

“A successful PSI operation is a necessary condition for a successor programme”.

Concluding its statement, the Eurogroup underscored that: “The respective contributions from the private and the official sector should ensure that Greece’s public debt ratio is brought on a downward path reaching 120.5% of GDP by 2020.”

“On this basis, and provided policy conditionality under the programme is met on an ongoing basis, the Eurogroup confirms that euro area member states stand ready to provide, through the EFSF and with the expectation that the IMF will make a significant contribution, additional official programme of up to EUR130bn until 2014.”

It ended: “We reiterate our commitment to provide adequate support to Greece during the life of the programme and beyond until it has regained market access, provided that Greece fully complies with the requirements and objectives of the adjustment programme.”

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