Greece reaches agreement with troika, bailout tranche expected within days
Greece and the troika have reached an agreement on outstanding structural reforms that will lead to the country’s lenders disbursing a 2.8-billion-euro loan tranche and another 7.2 billion euros for the recapitalization for the Greek banks.
“We have an agreement with the troika,” Finance Minister Yannis Stournaras told the audience at the Economist conference in Athens on Monday morning.
The breakthrough came over the weekend, when Athens and its lenders agreed on a formula for about 14,000 civil servants to be made redundant by the end of next year.
The head of the International Monetary Fund’s representation in the troika, Poul Thomsen, said that Greece might receive the money it is expecting by the end of the week.
Speaking at the same conference as Stournaras, Thomsen stressed several areas in which Greece had to improve its performance.
He said the government had to show greater will in tackling tax evasion, despite some improvements over the last few years. Thomsen also called for “thousands” of small bureaucratic obstacles to be removed in order to improve the Greek economy’s competitiveness.
He also advocated the introduction of new personnel in the civil service as a way of improving the efficiency of a number of departments, including tax collection.
Moments earlier, the troika released a statement confirming the completion of its latest review in Greece.
“The mission and the authorities agreed that the economic outlook is largely unchanged from the previous review, with continued prospects for a gradual return to growth in 2014, supported by inflation well below the euro area average and improved wage flexibility, which are helping to restore the competitiveness of the Greek economy,” the statement said.
“Fiscal performance is on track to meet the program targets, and the government is committed to fully implement all agreed fiscal measures for 2013-14 that are not yet in place, including adoption of legislation to extend collection of the real estate tax through 2013 via the Public Power Company.”
The troika highlighted the reform areas that were discussed during its visit to Athens.
“The authorities have made important progress on measures to improve tax and debt collection, through reforms of the revenue administration to provide it with significantly more autonomy, powers and resources, and adoption of more effective and enforceable installment schemes,” the statement said.
“Other main areas covered during the review included (i) administrative reform to improve the quality of the public service and strengthen accountability by streamlining its structures, removing positions, and reallocating staff, and through dismissals that are targeted at disciplinary cases and cases of demonstrated incapacity, absenteeism, and poor performance, or that result from closure or mergers of government entities not subject to the mobility scheme; (ii) liberalization of product and service markets including transport and retail trade; (iii) privatization of state-owned assets; and (iv) electricity sector reforms to ensure financial sustainability and avoid the build-up of debt.”
The troika also said that the release of the final instalment of funding for bank recapatilization would allow the process to be completed. “The mission’s assessment is that this will provide adequate capital, even under a significantly adverse scenario. These capital buffers will thus ensure the safety and soundness of the banking system and of its deposits.”
Athens is looking to the Eurogroup planned for May 13 for the approval needed for the next bailout tranche of 6 billion euros.
Eurozone finance ministers should have by then the reports from the European Commission and IMF based on the latest troika review.
This could lead to the 6-billion-euro instalment being broken into sub-tranches that will require Athens to complete “prior actions” before the funding could be released.