The Eurogroup approved on Monday the release of Greece’s two next bailout installments, totaling 7.5 billion euros, but was told that it would have to complete certain structural reforms before the second tranche is released in June.
Eurozone finance ministers agreed that Greece should receive 4.2 billion euros later this week after the Euro Working Group and the directors of the European Financial Stability Facility (EFSF) meet. The second sub-tranche of 3.3 billion euros will be disbursed once Greece has met the “milestones” agreed with the troika.
Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup, said that in order for Greece to receive the second sub-tranche, Greece would have to reform tax collection, liberalize professions and overhaul its public administration. Among other things, Athens has agreed to sack 2,000 civil servants by the end of June.
“We welcome that fiscal performance in 2012 complied with the program targets and that this is expected to continue in 2013 and 2014,” the Eurogroup said in a statement. “Greece is quickly regaining cost competitiveness, but product and services market reforms will need to accelerate to allow gains in cost competitiveness to translate more rapidly into prices.”
The head of the EFSF, Klaus Regling, said that Greece would receive the 7.5 billion euros in two tranches as it does not need the whole amount now and because it has to complete its “prior actions” first.
The disbursement, however, will take place before the troika’s next review of the Greek program. European Economic and Monetary Affairs Commissioner Olli Rehn said that inspectors would return to Greece in the next few weeks.
While the Greek side would have been encouraged by the outcome of the Eurogroup, Rehn may have put a damper on proceedings by underlining an earlier Commission report that sees the possibility of Greece having a larger-than-expected fiscal shortfall in the next few years.
“The Commission estimates that the fiscal gap for Greece could be larger in 2015 and 2016 than previously thought but it could also be lower if growth is larger,” he said, adding that it was too early to say if Athens would need to adopt new austerity measures to make up for such a shortfall.
Finance Minister Yannis Stournaras insisted that Greece would not have to raise taxes or cut wages. “We knew about the possibility of a gap,” he said, suggesting that Greece would beat its targets over the next two years and no extra measures would be needed.
Back in Athens, SYRIZA leader Alexis Tsipras castigated the government for its attempts to convince Greeks that the country is turning a corner. He accused the coalition of engaging in mythmaking.
“It is a myth that we are coming out of the tunnel,” said Tsipras at the Hellenic Federation of Enterprises (SEV) general assembly. “It is a myth that growth has begun. It is a myth that unemployment is being overcome. It is a myth that society has accepted the sacrifices.”
Tsipras accused the government of trying to “fool” society as he criticized SEV for not taking part in collective labor contract talks with unions. The SYRIZA leader added that a leftist government would not accept Greece’s public utilities being in private hands.
“A SYRIZA government and full privatization of water and electricity are incompatible things,” he said. “Growth equals democracy plus investment.”
Tsipras was given a warm welcome by SEV president Dimitris Daskalopoulos, who called for a “genuine dialogue” between SYRIZA and the entrepreneurs’ group. “SYRIZA’s radicalness is useful and welcome,” said Daskalopoulos.