EU Economy
Greece's bailout extended for 4 months; IMF, ECB dissent
By Michael Hennigan, Finfacts founder and editor
Feb 25, 2015 - 7:28 AM

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Angela Merkel, German chancellor, meets Alexis Tsipras, Greek prime minister, Brussels, Feb 12, 2015.

On Wednesday the new Greek government won the agreement of Eurozone's finance ministers to extend its €172bn bailout for four months after Athens presented a six-page letter with a list of economic reforms that will be implemented. However, the IMF and ECB expressed reservations about the list.

“We call on the Greek authorities to further develop and broaden the list of reform measures,” the Eurogroup said in a statement.

In response to the letter Yanis Varoufakis, Greek finance minister, detailing planned reforms, Christine Lagarde, IMF managing director, responded: "While the authorities’ list is comprehensive, it is generally not very specific, which is perhaps to be expected considering that the government is new in office. In some areas, like combating tax evasion and corruption, I am encouraged with what appears to be a stronger resolve on the part of the new authorities in Athens, and we look forward to learn more about their plans. In quite a few areas, however, including perhaps the most important ones, the letter is not conveying clear assurances that the Government intends to undertake the reforms envisaged in the Memorandum on Economic and Financial Policies. We note in particular that there are neither clear commitments to design and implement the envisaged comprehensive pension and VAT policy reforms, nor unequivocal undertakings to continue already-agreed policies for opening up closed sectors, for administrative reforms, for privatization, and for labor market reforms."

Mario Draghi, ECB president, also sent a letter to Jeroen Dijsselbloem, president of the Eurogroup and Dutch finance minister. "Our initial impression is that the document covers a wide range of reform areas and in this sense, it is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. However, as we expected it was not possible for the authorities to elaborate on concrete proposals and commitments that can be assessed by the institutions in respect to growth, public finances and financial stability. Given the very limited time available, this is understandable. I assume that it is clear that the basis for concluding the current review, and also for any future arrangements, will be the existing commitments in the current Memorandum of Understanding and the Memorandum of Economic and Financial Policies (MEFP)," Draghi wrote.

It was agreed that the Greek government will not get the €7.2bn in aid from the extended bailout until it agrees a final list of reforms by the end of April, and then implements them.

The Greek government said it would identify "cost saving measures through a thorough spending review of every ministry and rationalisation of non-salary and non-pension expenditures which, at present, account for an astounding 56% of total public expenditure."

The new term for the troika is "institutions."

Kathimerini, the Athens newspaper says: "The government [ ] faces pressures from within, with some ministers expressing reservations about the Greek proposal at a cabinet meeting Tuesday. Panayiotis Lafazanis, energy minister, is said to have objected to Greek pledges not to roll back privatizations. His and others’ objections are expected to be discussed when SYRIZA’s political secretariat convenes Wednesday."

The newspaper also reports that Bank of Greece figures confirmed on Tuesday that local tourism’s record year 2014 brought 22m visitors and €13.44bn in travel receipts. This represents a 23% increase in tourists and a 10.6% rise in revenues from 2013.

When cruise passengers are factored into the data to be published soon, the number of visitors will rise even higher.

Syriza, Greece’s ruling leftist party, has radical options to avoid both Grexit and eurozone demands, but would they work? FT columnist and associate editor Wolfgang Münchau debates with Reuters News editor-at-large Hugo Dixon. Lex’s Robert Armstrong chairs.

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