Eurogroup: Final agreement on May 24

It welcomed a package of policy reforms, which will cover:
the pension system
income tax and VAT
public sector wage bill measures
privatisation strategy
the issue of non-performing loans

The Eurogroup concluded that further work was needed by the Greek authorities and the institutions on a mechanism regarding additional contingency measures.
Jeroen Dijsselbloem, the chair of eurozone finance ministers, said he was hopeful of getting an agreement on Greek debt management in talks on 24 May.

Prime Minister Alexis Tsipras briefed opposition party leaders and met with President of the Republic, Prokopis Pavlopoulos.
A ministerial meeting will take place at 1 pm so as the ministers will be briefed on Eurogroup results and the negotiation progress.

Ahead of that meeting, technical experts have been asked to examine how to reduce Greece’s crushing debt burden, which is currently about 180% of the country’s annual economic output.
“My assumption is looking ahead that there will be a problem of debt sustainability that we need to address,” Dijsselbloem said, after eurozone finance ministers met in Brussels to discuss the Greek debt crisis.
But he insisted that creditors’ red lines would not be breached: this means neither writing off debt nor substantial changes to the austerity programme, which is the price of Greece’s multi-billion euro bailouts.
Instead, eurozone officials will examine how to ease the debt burden by tweaking repayment terms over the next three years, for example by turning short-term debt into long-term agreements in order to lock in lower interest rates. Also being explored are debt-relief plans once the current €86bn programme comes to an end in 2018.

Regarding the outstanding package of contingent measures, worth 2 percent of GDP, that the creditors have demanded, Greece’s proposal for a mechanism that will make automatic cuts in public spending if Athens does not hit its primary surplus targets in the coming years appears to have been accepted. The International Monetary Fund and other creditors had preferred that the government should legislate specific measures now and keep them on hold until it was clear whether they were needed to cover shortfalls in 2017 and 2018.

Contingency Mechanism
Finance Minister Euclid Tsakalotos had argued that passing such measures was not compatible with the Greek Constitution, while government officials had raised doubts about whether MPs would support another large austerity package at this stage.

“We will not make the Greeks legislate specific measures up front,” said Eurogroup president Jeroen Dijsselbloem. “We will make them legislate the mechanism, so it’s clear what happens if the program goes off course.”

Tsakalotos emerged from the Brussels meeting and stated: “It was a very good Eurogroup for Greece and I think a very good Eurogroup for Europe.”

However, the proposal for the automatic mechanism sent by Athens indicated that apart from some welfare spending, no form of expenditure would be protected from automatic reductions. This includes pensions and public sector wages, even though the coalition had repeatedly indicated that it would like to ringfence them.

On the legal issues of the contingency mechanism, Greek Finance Minister EukleidesTsakalotos clarified that it is going to run on a yearly basis, each May, asfter receiveing the Greek Statistical Service’s data, “If the result is below the target, there will be a presidential decree that will activate the mechanism.”

Some eurozone finance ministries have suggested this could mean extending debt maturities and lowering interest rates. Finally, the eurozone will look at long-term measures to reduce the burden of debt repayments that are scheduled to run for decades.