Eurogroup of finance ministers backs Greek deal

Suzanne Lynch, European Correspondent

The euro group of finance ministers has approved a list of reform measures proposed by the Greek government, paving the way for a four-month extension of the Greek bailout programme which was due to expire on Saturday.

In an official statement released after today’s conference call between euro zone finance ministers, the euro group said that the proposal was “sufficiently comprehensive” to be a valid starting point for a successful conclusion of the review. However, the statement noted that the reform measures “will be further specified and then agreed with the institutions at the latest by the end of April.”

The decision by euro zone finance ministers to back the proposals at this stage means that the proposal will now go to the national parliaments of the five euro zone countries which need parliamentary approval, a process that is expected to be completed by the end of the week.

The decision to back the proposal essentially paves the way for a four-month temporary programme for Greece during which time the details of the bailout programme will be negotiated and a possible new programme will be devised.

Earlier today, the two EU commissioners with responsibility for economic affairs, Pierre Moscovici and Valdis Dombrovskis wrote to the euro group president, outlining the European Commission's support for the proposals.

Among the commitments included in the six-page letter sent to the authorities by the Greek government last night are proposals to: reform and streamline VAT policy, improve public finance management, modernise the tax and custom administration systems, modernise the social security system and establish a closer link between pension contributions and income.

The new government has also pledged to “turn the fight against corruption into a national priority” and make the National Plan Against Corruption fully operational.

It has also committed not to roll back privatisations that have been completed, and to raise the minimum wage “over time” and only in consultation with social partners and the European and international institutions.

Earlier, Minister for Public Expenditure Brendan Howlin urged the new Greek government to build trust with the EU and IMF as it seeks to renegotiate the terms of its bailout in the coming months.

Speaking in Brussels this morning Minister Howlin, who was centrally involved in various renegotiations of parts of the Irish bailout programme, said that, like Syriza, Fine Gael and Labour had been elected to government while the bailout programme was still running.

“Tactically we differed from Greece in as much that we did a lot of that below the waterline as opposed to in the full glare of publicity,” he said.

“Within the first 100 days, we determined that we would reverse the minimum wage cut, which we did; that we would have a new stimulus package for the tourism sector by reducing the rate of VAT on the tourism product and the rate of PRSI on those employed in the tourism sector.”

He said the package, which was worth about half a billion euro at the time, was accepted by the Troika although negotiations were “difficult.”

“Every negotiation we had was extremely difficult because there was a process of building trust that we were going to deliver on our commitments. We made extraordinary changes in the programme over time as that trust developed,” he said.

Minister Howlin was speaking ahead of a ceremony to mark Ireland’s receipt of more than €800 million in EU structural and investment funds over the next seven years.

His comments come as euro group president Jeroen Dijsselbloem cited Ireland as an example of a bailout country which benefitted from flexibility already in the programme, by swapping some fiscal measures for measures of equivalent fiscal value.

Addressing the European Parliament’s economic and monetary affairs committee this morning in Brussels, the euro group chief said that Greece’s new government could put their “own political stamp” on the bailout, if they respect the programme’s main targets.

Greek stock markets rallied on the back of the euro group announcement. The ASE Index rose 8.5 per cent to 927.13 at 4:30 p.m. in Athens, with a gauge of banks rallying as much as 16 percent. The ASE is set to close at its highest level since Deember 8th.

Additional reporting: Reuters