Eurogroup urges Athens to deliver reforms in a week, shows flexibility for banks

Greece failed to secure the release of 2 billion euros in bailout funding at a Eurogroup summit on Monday, as expected, with creditors prodding Greek officials to push forward with outstanding reforms and reach a compromise on thorny issues that have been holding up negotiations within the next week.

However, in an apparent bid not to undermine the process of recapitalizing Greek banks, creditors watered down their demands for the release of 10 billion euros in loans for Greek banks, indicating that some aspects of a second set of prior actions will not be required for its release.

In comments at the close of the summit in Brussels, Eurogroup Chairman Jeroen Dijsselbloem said two key issues remained unresolved in negotiations: the level of protection to be granted to Greek homeowners and some residual actions on banking governance.

He said he welcomed the “commitment of the Greek authorities to fulfill the required measures in the course of the week.”

European Monetary and Economic Affairs Commissioner Pierre Moscovici said there was still “intense discussion on home foreclosures,” and stressed that those genuinely unable to pay should be protected but those “misusing the system” should be stopped.

According to sources, Athens has already made a new proposal to creditors on the foreclosures issue. The new scenario would offer protection to an average of 56 percent of primary residences, Kathimerini understands, a significant shift from the 99 percent of cases the government originally had sought to protect. 

The other outstanding issues highlighted by the Greek government include a payment plan allowing debtors to settle their dues in up to 100 installments and offsetting measures for a value added tax on private education.

Athens has proposed imposing a tax of 5 cents on games of chance to offset the VAT on private education. As for the payment plan, creditors want those who are even a day late in paying to be removed from the program.

In a statement after the summit, eurozone finance ministers said they awaited the completion of all prior actions set out in an initial list of measures and also referred to “financial sector measures” that must be completed “for a successful recapitalization process.”

The second list of measures Greek officials will have to legislate to secure another sub-tranche worth 1 billion euros has yet to be finalized. But it is likely to contain: higher taxes on farmers, more regulations regarding the governance of banks, an overhaul of the pension system and the creation of a new privatization fund. 

German Finance Minister Wolfgang Schaeuble on Monday referred to the privatization fund, linking its creation to the recapitalization of Greek banks.

In comments to reporters after the summit, Finance Minister Euclid Tsakalotos said despite “some delay,” most officials were pleased with Greece’s progress.

“We’re a bit pressed” on bank recapitalization, he said, adding that Greece has a week to finish off pending measures and also address issues relating to bank governance.