Euro
Summit. Brussels, 12 July 2015. SN 4070/15. EUROSUMMIT. Subject: Euro Summit
Statement Brussels, 12 July 2015.
A euro area Member State requesting
financial assistance from the ESM is expected to address, wherever possible, a
similar request to the IMF1 This is a precondition for the Eurogroup to agree
on a new ESM programme. Therefore Greece will request continued IMF support
(monitoring and financing) from March 2016.
Given the need to rebuild trust with Greece,
the Euro Summit welcomes the commitments of the Greek authorities to legislate
without delay a first set of measures. These measures, taken in full prior
agreement with the Institutions, will include:
By 15 July.
- The
streamlining of the VAT system and the broadening of the tax base to increase
revenue;
- Tupfront
measures to improve long-term sustainability of the pension system as part of a
comprehensive pension reform programme;
- The
safeguarding of the full legal independence of ELSTAT;
- Full
implementation of the relevant provisions of the Treaty on Stability,
Coordination and Governance in the Economic and Monetary Union, in particular
by making the Fiscal Council operational before finalizing the MoU and
introducing quasi-automatic spending cuts in case of deviations from ambitious
primary surplus targets after seeking advice from the Fiscal Council and
subject to prior approval of the Institutions;
By 22 July.
- The
adoption of the Code of Civil Procedure, which is a major overhaul of
procedures and arrangements for the civil justice system and can significantly
accelerate the judicial process and reduce costs;
- The
transposition of the BRRD with support from the European Commission.
Immediately, and only subsequent to legal
implementation of the first four above-mentioned measures as well as
endorsement of all the commitments included in this document by the Greek
Parliament, verified by the Institutions and the Eurogroup, may a decision to
mandate the Institutions to negotiate a Memorandum of Understanding (MoU) be
taken. This decision would be taken subject to national procedures having been
completed and if the preconditions of Article 13 of the ESM Treaty are met on
the basis of the assessment referred to in Article 13.1.
In order to form the basis for a successful
conclusion of the MoU, the Greek offer of reform measures needs to be seriously
strengthened to take into account the strongly deteriorated economic and fiscal
position of the country during the last year. The Greek government needs to
formally commit to strengthening their proposals in a number of areas
identified by the Institutions, with a satisfactory clear timetable for
legislation and implementation, including structural benchmarks, milestones and
quantitative benchmarks, to have clarity on the direction of policies over the
medium-run. They notably need, in agreement with the Institutions, to:
- Carry out
ambitious pension reforms and specify policies to fully compensate for the
fiscal impact of the Constitutional Court ruling on the 2012 pension reform and
to implement the zero deficit clause or mutually agreeable alternative measures
by October 2015;
- Adopt
more ambitious product market reforms with a clear timetable for implementation
of all OECD toolkit I recommendations, including Sunday trade, sales periods,
pharmacy ownership, milk and bakeries, except over-the-counter pharmaceutical
products, which will be implemented in a next step, as well as for the opening
of macro-critical closed professions (e.g. ferry transportation).
On the
follow-up of the OECD toolkit-II, manufacturing needs to be included in the
prior action;
- On energy
markets, proceed with the privatisation of the electricity transmission network
operator (ADMIE), unless replacement measures can be found that have equivalent
effect on competition, as agreed by the Institutions;
- On labour
markets, undertake rigorous reviews and modernisation of collective bargaining,
industrial action and, in line with the relevant EU directive and best
practice, collective dismissals, along the timetable and the approach agreed
with the Institutions. On the basis of these reviews, labour market policies
should be aligned with international and European best practices, and should
not involve a return to past policy settings which are not compatible with the
goals of promoting sustainable and inclusive growth;
- Adopt the
necessary steps to strengthen the financial sector, including decisive action
on non-performing loans and measures to strengthen governance of the HFSF and
the banks, in particular by eliminating any possibility for political
interference especially in appointment processes.
On top of
that, the Greek authorities shall take the following actions:
- To
develop a significantly scaled up privatisation programme with improved
governance; valuable Greek assets will be transferred to an independent fund
that will monetize the assets through privatisations and other means. The
monetization of the assets will be one source to make the scheduled repayment
of the new loan of ESM and generate over the life of the new loan a targeted
total of EUR 50bn of which EUR 25bn will be used for the repayment of
recapitalization of banks and other assets and 50 % of every remaining euro
(i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and
the remaining 50 % will be used for investments. This fund would be established
in Greece and be managed by the Greek authorities under the supervision of the
relevant European Institutions. In agreement with Institutions and building on
best international practices, a legislative framework should be adopted to
ensure transparent procedures and adequate asset sale pricing, according to
OECD principles and standards on the management of State Owned Enterprises
(SOEs);
- In line
with the Greek government ambitions, to modernise and significantly strengthen
the Greek administration, and to put in place a programme, under the auspices
of the European Commission, for capacity-building and de-politicizing the Greek
administration. A first proposal should be provided by 20 July after
discussions with the Institutions. The Greek government commits to reduce
further the costs of the Greek administration, in line with a schedule agreed
with the Institutions;
- To fully
normalize working methods with the Institutions, including the necessary work
on the ground in Athens, to improve programme implementation and monitoring.
The government needs to consult and agree with the Institutions on all draft
legislation in relevant areas with adequate time before submitting it for
public consultation or to Parliament. The Euro Summit stresses again that
implementation is key, and in that context welcomes the intention of the Greek
authorities to request by 20 July support from the Institutions and Member
States for technical assistance, and asks the European Commission to coordinate
this support from Europe;
- With the
exception of the humanitarian crisis bill, the Greek government will reexamine
with a view to amending legislations that were introduced counter to the
February 20 agreement by backtracking on previous programme commitments or
identify clear compensatory equivalents for the vested rights that were
subsequently created.
The above-listed commitments are minimum
requirements to start the negotiations with the Greek authorities. However, the
Euro Summit made it clear that the start of negotiations does not preclude any
final possible agreement on a new ESM programme, which will have to be based on
a decision on the whole package (including financing needs, debt sustainability
and possible bridge financing).
The Euro Summit takes note of the possible
programme financing needs of between EUR 82 and 86bn, as assessed by the Institutions.
It invites the Institutions to explore possibilities to reduce the financing
envelope, through an alternative fiscal path or higher privatisation proceeds.
Restoring market access, which is an objective of any financial assistance
programme, lowers the need to draw on the total financing envelope. The Euro
Summit takes note of the urgent financing needs of Greece which underline the
need for very swift progress in reaching a decision on a new MoU: these are
estimated to amount to EUR 7bn by 20 July and an additional EUR 5bn by mid
August.
The Euro Summit acknowledges the importance
of ensuring that the Greek sovereign can clear its arrears to the IMF and to
the Bank of Greece and honour its debt obligations in the coming weeks to
create conditions which allow for an orderly conclusion of the negotiations.
The risks of not concluding swiftly the negotiations remain fully with Greece.
The Euro Summit invites the Eurogroup to discuss these issues as a matter of
urgency.
Given the acute challenges of the Greek
financial sector, the total envelope of a possible new ESM programme would have
to include the establishment of a buffer of EUR 10 to 25bn for the banking
sector in order to address potential bank recapitalisation needs and resolution
costs, of which EUR 10bn would be made available immediately in a segregated
account at the ESM.
The Euro Summit is aware that a rapid
decision on a new programme is a condition to allow banks to reopen, thus
avoiding an increase in the total financing envelope. The ECB/SSM will conduct
a comprehensive assessment after the summer. The overall buffer will cater for
possible capital shortfalls following the comprehensive assessment after the
legal framework is applied.
There are serious concerns regarding the
sustainability of Greek debt. This is due to the easing of policies during the
last twelve months, which resulted in the recent deterioration in the domestic
macroeconomic and financial environment. The Euro Summit recalls that the euro
area Member States have, throughout the last few years, adopted a remarkable
set of measures supporting Greece's debt sustainability, which have smoothed
Greece's debt servicing path and reduced costs significantly.
Against this background, in the context of a
possible future ESM programme, and in line with the spirit of the Eurogroup
statement of November 2012, the Eurogroup stands ready to consider, if
necessary, possible additional measures (possible longer grace and payment
periods) aiming at ensuring that gross financing needs remain at a sustainable
level. These measures will be conditional upon full implementation of the
measures to be agreed in a possible new programme and will be considered after
the first positive completion of a review.
The Euro Summit stresses that nominal
haircuts on the debt cannot be undertaken. The Greek authorities reiterate
their unequivocal commitment to honour their financial obligations to all their
creditors fully and in a timely manner. Provided that all the necessary
conditions contained in this document are fulfilled, the Eurogroup and ESM
Board of Governors may, in accordance with Article 13.2 of the ESM Treaty,
mandate the Institutions to negotiate a new ESM programme, if the preconditions
of Article 13 of the ESM Treaty are met on the basis of the assessment referred
to in Article 13.1.
To help support growth and job creation in
Greece (in the next 3-5 years) the Commission will work closely with the Greek
authorities to mobilise up to EUR 35bn (under various EU programmes) to fund
investment and economic activity, including in SMEs.
As an exceptional measure and given the
unique situation of Greece the Commission will propose to increase the level of
pre-financing by EUR 1bn to give an immediate boost to investment to be dealt
with by the EU co-legislators. The Investment Plan for Europe will also provide
funding opportunities for Greece.
1 ESM
Treaty, recital (8).
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