Eurozone backs Greek deal
Extension to rescue package after Athens waters down leftist pledges
GREECE has secured a four-month extension of its financial rescue after its eurozone partners approved a reform plan that backed down on key leftist measures and promised spending to alleviate social distress would not derail its budget.
Finance ministers sealed the decision in a one-hour telephone conference convened by Eurogroup chairman Jeroen Dijsselbloem after the new leftist-led Athens government sent him a detailed list of reforms it plans to implement by July.
The ministers reviewed a six-page document signed by Marxist Finance Minister Yanis Varoufakis that watered down campaign promises to halt privatisations, boost welfare spending and raise the minimum wage and vowing to consult partners before key reforms.
Both the European Commission and the International Monetary Fund called the Greek letter “sufficiently comprehensive to be a valid starting point for a successful conclusion of the review”.
In a statement, the 19-nation Eurogroup urged Greece to develop and broaden the list of reform measures, based on “the current arrangement” – a euphemism for the bailout agreement which leftist Prime Minister Alexis Tsipras had vowed to scrap.
In a foretaste of tough negotiations to come, IMF Managing Direc- tor 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.
And Slovak Finance Minister Peter Kazimir, reflecting deep scepticism among northern European fiscal hawks, said: “Greeks have lots of heavy lifting to do until end-April. We all want to see numbers now.”
Financial markets surged even before confirmation of the extension of the 240 billion euro EU/IMF bailout, saving Greece for now from an imminent banking collapse, state bankruptcy and a possible exit from the eurozone.
The country’s longer-term financial future remains uncertain with Mr Dijsselbloem telling the European Parliament the eurozone’s most heavily indebted member is likely to need further assistance after two bailouts since 2010.
The Greek letter pledged not to reverse ongoing or completed privatisations, and to ensure the fight against what the government calls the humanitarian crisis caused by austerity “has no negative fiscal effects”.
The six-page document contained few figures but promised to improve tax enforcement, fight corruption and “review and control spending in e ver y area of gover nment spending”.
Mr Dijsselbloem, who is also Dutch finance minister, told MEPs Athens was likely to need a further aid programme when the four months expires, saying: “I think we need to consider further support for Greece.”
The eurozone could consider further debt relief measures if Athens met all the criteria specified in its November 2012 second bailout, “which hasn’t happened yet”, he said.
He insisted a Greek exit from the eurozone had not been discussed and was not on the table, adding the only government to have held a meeting to prepare for a possible “Grexit” was in non-euro Britain.
German Finance Minister Wolfgang Schaeuble wrote to parliament requesting a vote this week on extending the bailout.