The Euro Summit has issued a statement regarding the agreement reached with Greek authorities, as a prerequisite for a new loan from the European Support Mechanism.
The new Greek bailout will involved an 86-billion-euro loan from the ESM, with the participation of the IMF, which may provide 16 billion euros from the current program. The bailout includes a 35-billion-euro growth package and a series of measures that will aim to support the sustainability of the Greek debt. It is underlined that a nominal debt haircut is ruled out.
One of the more controversial aspects of the bailout is the establishment of a fund that will manage Greek assets, aiming to generate 50 billion euros. Of these 50 billion euros, 25 billion will go towards the recapitalization of the banks, 12.5 towards debt payments and the remaining 12.5 will go towards investment. The institutions will closely monitor the progress of implementation in Athens.
The statement outlines what needs to be done. By the 15th of July the Greek government will have to commit to the following:
- streamlining of the VAT system and the broadening of the tax base to increase revenue;
- upfront measures to improve long-term sustainability of the pension system as part of a comprehensive pension reform program;
- the safeguarding of the full legal independence of ELSTAT;
- full implementation of the relevant provisions of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, in particular by making the Fiscal Council operational before finalizing the MoU and introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the Fiscal Council and subject to prior approval of the Institutions;
Subsequently, the Greek government will have to commit to the following by the 22nd of July:
- the adoption of the Code of Civil Procedure, which is a major overhaul of procedures and arrangements for the civil justice system and can significantly accelerate the judicial process and reduce costs;
- the transposition of the BRRD with support from the European Commission.
The Euro Summit statement in full is available online.
