Eurogroup to decide on bailout tranche after troika wraps up review, leaves Greece with ‘corrective actions’ to take

The troika gave Greece mixed marks on Monday as it completed its review of the country’s adjustment program and highlighted the reforms the government needs to implement in the coming days and weeks.

The statement from the European Commission, European Central Bank and International Monetary Fund came a few hours before eurozone finance ministers were due to meet in Brussels to decide on the release of further bailout loans for Greece.

“This morning we reached an agreement within the troika,” Dutch Finance Minister Jeroen Dijsselbloem said as he arrived for the talks. “We are going to judge their progress. Based on that we may decide on a next tranche” that may be divided into installments if that’s “necessary” and “helpful,” he said.

European governments led by Germany are continuing to keep Greece on life support, unwilling to let it go bankrupt and exit the euro while doling out aid in the smallest possible doses to avoid upsetting their own taxpayers.

Political tumult in Portugal, among the five euro countries tapping emergency aid, raised the pressure on creditors to keep Greece’s program on track. Germany, the biggest creditor, is seeking to avoid a flareup in the crisis as Chancellor Angela Merkel campaigns for re-election in September.

“While important progress continues to be made, policy implementation is behind in some areas,” the troika, comprising the European Commission, International Monetary Fund and European Central Bank, said in a statement on Monday.

The troika highlighted a number of “corrective actions” that the government would have to take. “These actions include concrete steps to gain control over health sector overspending,” the troika’s statement said. “The mission and the authorities agreed that the macroeconomic outlook remains broadly in line with programme projections, with prospects for a gradual return to growth in 2014. The outlook remains uncertain, however.”

“The income tax, property tax, and tax procedure codes are being reformed, and the autonomy and efficiency of revenue administration is being strengthened. The authorities have also committed to take steps to bring public administration reforms back on track, such as by completing staffing plans by end-year, placing staff in the mobility and reallocation scheme, and meeting the agreed targets for mandatory exits.”

The troika said that there had been no agreement with Greece over a reduction of VAT in the food service sector but that discussions over the issue would continue.

Greece’s lenders noted that the government would have to prepare an omnibus bill to implement the reforms agreed. Kathimerini understands that this legislation could be tabled in Parliament as early as Tuesday.

Among the measures agreed with the officials from the European Commission, European Central Bank and International Monetary Fund are a luxury tax that will be implemented from this year in order to help close a 2-billion-euro funding gap for 2013 and 2014.

The two sides have also agreed that the unified property tax will be applied from next year and will be collected by tax offices, not through electricity bills. It is expected to raise up to 2.9 billion euros per year.

There was also an agreement to reduce pensions for retired military personnel and to slash 125 million euros from the defense budget.

The Greek government also agreed to expand the number of people insured by the fund for the self-employed, OAEE, in order to cover a 600-million-euro shortfall in its finances.

The Eurogroup is expected to approve the disbursal of another 6.3 billion euros for Greece on Monday, with another 1.8 billion euros to follow from the IMF.

Of the 6.3 billion euros from the eurozone, Greece is expected to receive 3 billion euros this month and another 1.8 billion in September, when the troika’s milestones have been met.

Finance Ministry sources said this is enough for Greece to meet its financing needs until the end of September.

[Kathimerini & Bloomberg]

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