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25/09/2016

Greek reform list fails to impress lenders

Euro & Finance

Greek reform list fails to impress lenders

Alexis Tsipras and Jean-Claude Juncker. [European Commission]

Greece sent an updated list of reforms to lenders yesterday (1 April) to try to unlock financial aid and avoid a default. But eurozone officials said more work was needed before new funds could be released.

Greece is weeks away from running out of cash but its eurozone and International Monetary Fund lenders have frozen support payments until it implements reforms, with talks bogged down over what measures the leftist-led government must take.

“We sent a new document today to the Brussels Group (of EU/IMF lenders) which is more specific and quantified,” a Greek finance ministry official told reporters, noting that labour and pension reform were the main sticking points in negotiations.

Eurozone officials said, however, that institutions representing the lenders – the European Commission, the European Central Bank and the IMF – got the list too late for it to be discussed by eurozone deputy finance ministers at a teleconference on Greece on Wednesday afternoon.

One eurozone official familiar with the content of the call said recent talks on the reforms had made progress, but that more work was needed for a deal.

EU officials confirmed the new reform list, published by the Financial Times, was genuine, but noted it still needed more work.

“It still lacks detail and substance in many places,” said one EU official, who is familiar with the views of the lenders but is not a policy maker.

The 26-page document states clearly that Greece considers itself an irrevocable member of the single currency area, making clear it had no intention of exiting the eurozone or the European Union.

It says that the country’s financing needs in 2015 are €19 billion. It expects to get €1.5 billion from selling off state assets, a far cry from the €4 billion envisaged by the agreement with the previous government.

The government pledges to crack down on tax fraud, raise tax on luxuries and review asset sales on a case-by-case basis. It also proposes reintroducing an extra payment for poor pensioners and a gradual hike in the minimum wage and retaining government administration staffing levels.

Discussions on the reforms between Greece and the representatives of the creditors are scheduled to continue next week, officials said.

Payment test

A payment to the IMF of about €430 million, due next week, is shaping up to be the next financial test for Greece, which is already resorting to last-ditch measures like borrowing from state entities to tide it through the cash crunch.

In an interview with Der Spiegel, Interior Minister Nikos Voutsis said that if foreign creditors do not send Athens further funds by 9 April, the government would first pay salaries and pensions, and then come to an agreement with lenders on paying the IMF late.

But Prime Minister Alexis Tsipras’s government, which was elected in January on promises to ease the terms of the bailout and cut debt, said the comments did not represent its stance.

“There is no chance that Greece will not meet its obligations to the IMF on 9 April,” government spokesman Gabriel Sakellaridis told Reuters.

The Russian card

Labour Minister Panos Skourletis said a planned visit by Tsipras to Moscow next week was “to find out whether our historic friendship with Russia can be stretched to other levels”, German newspaper Die Zeit reported.

“We’d like to stay on the ship called Europe,” Skourletis was quoted as saying. “But if the captain pushes us overboard, we need to try to swim.”

But Athens would only reveal what role Russia might play “if nothing works anymore”, Skourletis said.

Earlier, Economy Minister George Stathakis said he expected an agreement with lenders next week on a package of reforms submitted by Athens to help unlock remaining bailout funds.

“I think talks will lead to a deal next week. The agreement will close on (Greek Orthodox) Easter week,” he told Skai TV.

The list proposed by Athens includes the leasing of 14 regional airports and the sale of Greece’s largest port, Piraeus, to raise €1.5 billion this year, although ministers have made conflicting statements on the port sale.

On Wednesday, Stathakis said the government had no plans to sell all of its 67% stake in Piraeus Port Authority, but would seek a joint venture with investors. 

Background

On 20 March, the European Commission offered Greece funds to deal with what it called a humanitarian crisis, after Prime Minister Alexis Tsipras vowed to clarify bailout reform pledges demanded by creditors.

Following crisis talks between Tsipras and European leaders, EU Commission chief Jean-Claude Juncker said he was making available 2.0 billion euros in unused EU structural funds to Greece.

Tsipras promised to deliver full reform list after three-hour 'mini summit' at the European Council last week (19-20 March).

>> Read: Greece promises to deliver full reform list after three-hour 'mini summit'

Greece secured a four-month extension of its financial rescue on 24 February, when its eurozone partners approved an economic reform plan that backed down on key measures and promised that spending to alleviate social distress would not derail its budget.

>> Read: Eurozone approves Greek reform plan with reservations

Germany's rejection of an initial Greek request for a six-month loan extension forced Athens into a string of politically sensitive concessions, postponing or backing away from campaign promises to reverse austerity, scrap the bailout and end cooperation with the "troika" of EU, ECB and IMF inspectors.

>> Read: Greece, eurozone agree to four-month loan extension, avert crunch