Europe

Greece debt crisis: Eurozone backs reform plans

  • 24 February 2015
  • From the section Europe
Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem (centre), 24 February 2015 Image copyright AFP
Image caption Jeroen Dijsselbloem (centre) said Greece had a right to put its own "stamp" on the bailout programme

Eurozone finance ministers have approved reform proposals submitted by Greece in order to obtain a four-month extension of its bailout.

The Eurogroup said it had agreed to begin national procedures - parliamentary votes in several states to give the deal final approval.

The measures offered by Greece include combating tax evasion and reforming the public sector.

But the head of the IMF said they lacked "clear assurances" in key areas.

Greece's debt stands at more than €320bn (£237bn), and its current €240bn bailout expires on Saturday. Fresh funding will not be released until Greece's proposals are approved in detail.

The stakes of talks over continued financial aid have been high because of fears of a Greek default that could push it out of the euro, triggering turmoil in the EU.

The main stock market in Athens rose by nearly 10% on Tuesday afternoon, hitting a three-month high.

'Serious enough'

The Eurogroup said in a statement: "We call on the Greek authorities to further develop and broaden the list of reform measures, based on the current arrangement, in close co-ordination with the institutions."

The European Commission and the European Central Bank (ECB) both stated that the Greek proposals were a "valid starting point".

The agreement had "averted an immediate crisis," said European Commissioner for Economic Affairs Pierre Moscovici.

"It does not mean we approve those reforms, it means the approach is serious enough for further discussion," he added.


Greek proposals

Image copyright AP
  • Combat tax evasion
  • Tackle corruption
  • Commit not to roll back already introduced privatisations, but review privatisations not yet implemented
  • Introduce collective bargaining, stopping short of raising the minimum wage immediately
  • Tackle Greece's "humanitarian crisis" with housing guarantees and free medical care for the uninsured unemployed, with no overall public spending increase
  • Reform public sector wages to avoid further wage cuts, without increasing overall wage bill
  • Achieve pensions savings by consolidating funds and eliminating incentives for early retirement - not cutting payments
  • Reduce the number of ministries from 16 to 10, cutting special advisers and fringe benefits for officials

Greek pledges: Key points

Pressure still on despite deal


However, International Monetary Fund (IMF) head Christine Lagarde expressed reservations about the reform proposals.

"In some areas like combating tax evasion and corruption I am encouraged by what appears to be a stronger resolve on the part of the new authorities in Athens," she wrote in a letter to the Eurogroup.

"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."

The IMF, ECB and the Commission make up the "troika" of institutions that have managed financial rescue programmes for Greece since 2010.

'Perhaps too optimistic'

The four-month bailout extension was agreed on Friday after several rounds of talks, pending Greece's delivery of its reform proposals.

The deal was widely seen as a climbdown by Greek Prime Minister Alexis Tsipras. The newly elected leader of the left-wing Syriza party is trying to balance satisfying the demands of creditors with meeting his pre-election pledges.

His government wants to clamp down on tax evasion, corruption and inefficiency in order to fund social spending and alleviate what it calls Greece's "humanitarian crisis".


Analysis: Mark Lowen, BBC News, Athens

The government has rowed back on pledges to raise the minimum wage and rehire civil servants, but has persuaded the eurozone to allow it to spend some money to help the poor with health insurance and food handouts.

Some on the left of the governing party are opposed to what they see as a climbdown on pre-election promises. But many here are ready to accept a compromise, giving their government credit for actually negotiating rather than simply accepting the eurozone's demands.

This is, in reality, a short-term fix for an economy in which public debt is unsustainable and growth negligible. And in four months' time, Greece will be back at the top of the agenda as the eurozone attempts to work out a long-term strategy for its most debt-stricken member.


ECB head Mario Draghi noted that Greek commitments "differ from existing programme commitments in a number of areas". He said there would be a need to assess whether measures rejected by Greece were "replaced with measures of equal or better quality".

Eurogroup chairman Jeroen Dijsselbloem said the Greek government had a right to put its own "stamp" on the bailout programme.

"The new government is much more aggressive on taxes and corruption, and these are excellent things," he told Dutch radio.

"But the Greek government is perhaps too optimistic about the speed with which they can boost tax revenues."


Greek economy in numbers

Image copyright AP
  • Unemployment is at 25%, with youth unemployment almost 50% (corresponding eurozone averages: 11.4% and 23%)
  • Economy has shrunk by 25% since the start of the eurozone crisis
  • Country's debt is 175% of GDP
  • Borrowed €240bn (£188bn) from the EU, the ECB and the IMF