No debt verdict at Euro Working Group

No debt verdict at Euro Working Group

The meeting of the Euro Working Group (EWG) ended on Tuesday with no agreement on whether the implementation of the short-term debt relief measures for Greece can go ahead, although the impasse may be overcome if Finance Minister Euclid Tsakalotos sends a letter of clarification regarding the recent handouts pledged by the government.

A number or eurozone member-states raised objections on Tuesday to the coalition’s decision to award pensioners a 617-million-euro Christmas bonus and to freeze the value-added tax rise on some Aegean islands.

Austria, the Netherlands, Slovakia, Slovenia and Finland were among those that complained, while the German representative went as far as suggesting that the short-term debt relief measures agreed at the Eurogroup in early December should only be implemented after Greece and its lenders complete the second review.

In a bid to overcome the impasse, EWG head Thomas Wieser proposed that Tsakalotos send a letter confirming that the payments to pensioners are a one-off measure and the freeze on the VAT rise will only be for 2017. The Greek finance minister is also expected to pledge that if the government does not meet its fiscal targets it will make savings from pensions, and that any future excess surplus will be directed to reducing state arrears or funding the guaranteed minimum income.

The Greek representative, Alternate Finance Minister Giorgos Houliarakis, accepted the proposal but rejected the German position that the debt-relief measures, which are due to apply from January 1, should be delayed any further. Athens points out that the steps to reduce Greece’s debt are linked to the completion of the first review.

Wieser suggested that if there are no objections to Tsakalotos’s letter by this afternoon, then the debt relief measures can go ahead. If there are complaints, it is likely a Eurogroup will be held via teleconference so there can be a final decision.

Speaking in Thessaloniki on Tuesday, Deputy Prime Minister Yiannis Dragasakis insisted that it is Greece’s “sovereign right” to distribute the excess surplus and that this is in line with its bailout commitments. He suggested that the money handed to pensioners came from an increase in VAT revenues since last year and that future measures could include targeted tax reductions.

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