Moscovici says front-loaded measures for Greek debt will enhance confidence

What Greece needs in order to gain full access to the money markets is debt relief through significant, front-loaded measures that will enhance confidence in the local economy, European Commissioner for Economic and Monetary Affairs Pierre Moscovici told Kathimerini in an interview published on Tuesday.

The French politician added that after the program ends Greece will be subject to increased surveillance, though not a precautionary credit line.

He also appeared certain that a total agreement will be made at the June 21 Eurogroup meeting.

Are you confident we will reach a final deal on the completion of the review, post-program surveillance and debt measures by June 21 or could we see a solution at the July Eurogroup?

I’m confident. I think everybody is in that spirit, and that will also send a strong signal for the summit on June 28 and 29 that things are on track with Greece, that we closed the chapter, and that we are moving to a strong future for our euro area. I feel in all the discussions I have bilaterally with ministers from other countries, with [Eurogroup President] Mario Centeno, with the institutions – the International Monetary Fund, the European Central Band and the European Stability Mechanism – that everybody is moving in the same direction. This doesn’t mean it’s done. We are not there yet, but we will get there if everybody assumes their responsibilities.

The markets have said that they want to see the IMF participating in the Greek program with money on the table. So far it seems that it will not participate in such a way, so how can we be sure that Greece will achieve a credible exit in the eyes of the markets?

The IMF is not the main issue. Let’s go back to the building blocks. First, it is obvious that we need to have a completion of the fourth review and over the coming days I hope the Greek authorities will focus all their attention and energy on the completion of the prior actions of the fourth review. So, 88 prior actions must be completed and, from my discussions with Greek authorities, with [Prime Minister] Alexis Tsipras and with [Finance Minister] Euclid Tsakalotos, we will be there soon. The vote of the prior actions this week will be a very positive signal while we are trying to conclude talks on debt relief. Again, this is the Greek part of the deal and it must be done fully, sincerely and on time. If we get that, we can move to the other parts of the deal. The most important is that we need a convincing deal on debt-relief measures from euro-area member-states. If Greece shows that it has kept its side of the bargain then all other partners must keep theirs. The debt package has to include sufficiently ambitious upfront elements so that it will be seen as credible by the markets. The latest developments in the discussions lead me to be more optimistic that the Eurogroup will reach a good agreement on debt and the last talks in the Euro Working Group showed clearly that everyone is moving toward a consensus.

Even if the IMF doesn’t fully participate in the Greek program, do you feel that the upfront debt measures will be enough to convince the markets that the debt is sustainable?

I think these upfront measures are the decisive element and not the only one. There are other points as well, but this is the signal the markets are waiting for. It is for the IMF to decide whether or not it is going to activate its program and frankly at this stage this appears uncertain, because the program will end in a little over two months. So, what matters is that the IMF is reassured by the agreement we reached on debt sustainability and is able to publicly endorse that agreement. This is key for the credibility of the agreement and for investor confidence. Again on the debt package, the package must be strong enough so the IMF continues along the road with us even beyond the end of the program, at least for post-program Article 4 surveillance. All the partners want to see the IMF’s involvement continue.

Could you describe how the enhanced surveillance will work, the guidelines? How often will the missions come to Greece, what kind of conditionality will there be and how important is it for Greece to stick to reforms?

We are not there yet. I have said many times that the end of the program needs to mark a tangible change for Greece, the moment of normalization of the country. What I want is for Greece to be a normal member of the eurozone. The post-program surveillance, must not, cannot and will not look like a fourth program. At the same time there is a need to provide assurances to investors and creditors that Greece will stick to responsible fiscal policies and will see through the implementation of program measures. That is why the enhanced surveillance option is the most likely tool to be used there. It will offer somewhat closer monitoring than is the case of standard post-program surveillance but it will be qualitatively different from the situation Greece has been living the past eight years as a program country. So, no fourth program but enhanced surveillance. The EC will flesh out how it works, as it will be the first time it is used.

Why will Greece need enhanced surveillance instead of a clean exit like the other program countries had?

Let’s look at facts. The Greek crisis has been by far the strongest and longest in the eurozone. Greece today is not in the situation of recovery of Ireland or Portugal. The debt problem is here to stay for a long time, even if we address it with strong debt relief measures. That’s why Greece needs to have responsible fiscal policy for a long time. The markets will have to be reassured, creditors and investors need to be reassured, and this is why there must be clarity on the implementation of program measures – not this year or next, but for the medium term. That’s why we need enhanced surveillance.

I know the Greek government and the European Commission are not interested in a precautionary credit line, but seeing recent developments in Italy, is this back on the table for at least some member-states? Is the ECB pushing for that?

No, no one is pushing for that. Everybody wants Greece to be out of its program as a normal country in the eurozone. No one wants a fourth program. Everyone wants a strong implementation – that’s point one – a strong package – that is point two – and significant post-program surveillance – that’s point three. If we have all of the above then we will have Greece exiting the program in a positive way that is also credible to the markets.

Greece will be the first country to feel the impact of turbulence in Italy on its economy. Are you sure Greece will be able to tap the markets regardless of factors outside its control?

I want to send a reassuring message about Italy. Our first exchanges – and I spoke to the Italian finance minister on Friday – show that Italy is committed that it belongs to the euro area and in respect to the commitments taken in our common framework. This is why I see that the markets are reassured about Italy and we are entering positive dialogue with the Italian government. What happens to the world can impact all of us. So let’s not pinpoint Greece. If there are geopolitical troubles, that will be for all of us. Let’s not speculate on the worst-case scenario.

The second point is that if we get a strong debt package with upfront measures, markets will be reassured about Greece on its own. This is why we don’t need a credit line, why we don’t need anything like a fourth program. Greece will be absolutely capable of flying with its own wings after the end of the third program. I’m sure about that.

If the Greek government rolls back measures in the coming months, either because we may enter an election year or whatever, what will be the impact on the Greek economy?

I think the government has understood that it’s in Greece’s interest to conclude the program and key for that is credibility. And if you get enhanced surveillance post-program, it means that responsible fiscal policies must be maintained in the medium term with this government, the next government and those after that. So we are not acting for next year or the next elections. We are acting for the future of Greece in the long run, in the euro area.