Despite mutual agreement on the benefits of a swift conclusion of the second review of Greece’s third bailout programme, problems for Athens persist as all institutions align their position towards the “pre-legislation” of measures until after the ESM bailout for the 2019-2020 period.
Greece is alone in opposing the idea, with only the French IMF minister being somewhat supportive of their position. All other institutions, including the European Commission, have aligned their position with the International Monetary Fund (IMF), a non-EU creditor.
“There is still one outstanding issue with the IMF, that once asked to legislate for measures after the programme period now, that seems for us to be needing rethinking,” the Greek finance minister Euclid Tsakalotos said after exiting the European Council’s new Europa building in Brussels.
Tsakalotos underlined that each institution recognised Greece’s progress before he attacked the IMF on its position. According to Eurogroup President Jeroen Dijsselbloem are now common ground within all the EU institutions. He refused to answer any questions.
“The fiscal overperformance is so good, so every time we outperform it makes the chances of needing measures even less,” Tsakalotos said on the 2019-2020 measures that all creditors asked Greece to enact on their labour market and pension system.
Tsakalotos insisted that this issue must be “rethinked” because the new measures stretch beyond the democratic spirit of Europe.
He added that it was not correct to ask a country to plan legislation for measures that ended in 2019. This measure asked for a commitment that went well beyond the framework of democracy and the ethical values that inspired Europe.
“I think there will be initiatives from today onwards to close the gap and I think that because all sides are committed to quick solution we could have a degree of confidence,” the Greek finance minister concluded.
EU institutions agree with the IMF, underlines Dijsselbloem
Just minutes after Tsakalos’s remarks, all three EU institutions confirmed that they shared the IMF’s position on pre-legislating measures, but added that there was still discussion over the level of primary surplus targets.
“This possibly is part of the common ground, the compromise that we could find, to define this medium term,” Dutch finance minister Dijsselbloem said on the issues that were still on the table.
This issue, among with other “little, difficult bits” remain open, and are the ones that separate the institutions from returning to Athens for final talks on the second review.
“The IMF is fully involved, even if not formally part of the programme and has been very constructive, helping to negotiate and design the reforms,” Dijsselbleom said, underlining his belief that the IMF’s a positive factor.
Dijsselbloem added that the IMF will come to a board decision on whether it will continue to be part of the Greek programme after reforms have been implemented.
“The IMF has a lot of expertise in Greece and financial envelope are valued very much. With the expertise of the ESM, future programmes that I don’t hope to see, will be done from EU institutions only,” Dijsselbloem said.
In Dijsselbloem’s perspective, the IMF’s position has not changed from the beginning despite their contributions in stabilising and aiding in the smooth enrollment of the programme.
“IMF wants the reform package to be credible, the fiscal trajectory to be feasible and viable and they want the debt to be sustainable,” Dijsselbloem said.
As he further explained, the “heart of the debate,” or the activation of the 2019-2020 measures, would mean that the restructuring of the Greek economy would go off-track.
“Whether the current over-performance [of Greece on fiscal targets] are of a structural nature, with would mean that Greece is fully on track for 2018 and the years behind,” Djisselbloem said.
Still under discussion remains the depth of the reforms, the design of the labour market reforms and pension reform and the tax issues. According to talks with the IMF and Regling, the size of debt relief needed would be decided when part of the package has been implemented and the second portion becomes available.
On this issue, the ESM’s debt release measures mechanism estimated that reducing the debt stock by 20% and gross financing needs for 6% would not be enough progress for the IMF, according to the ESM’s managing director.
As the clock ticks for all sides, the EU institutions want to receive the IMF’s verification that it will continue being part of the programme before concluding the review, well before March’s elections in the Netherlands opens Europe’s electoral circle for 2017.
Dijsselbloem has an extra reason to push towards that direction, as his position could be at stake if his party loses the election, despite some voices – such as France’s Michel Sapin – suggested that he would keep his position as Eurogroup President, even if he failed to keep his ministerial chair as Dutch minister of finance.