Greece will get its next installments of 8.6 billion euros in aid from international lenders to keep the economy afloat, but it will be divided into three payments over concern that the government’s pace of reforms is lagging.
The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) said while the country’s program is generally on track that there are critical deficiencies in key areas and is moving too slowly.
They also warned that the country’s economic outlook remains uncertain. Despite these concerns, finance ministers from the 17 European Union countries that use the euro agreed to release the next installment of Greece’s bailout.
Belgian Finance Minister Koen Geens said the loans would be divided into three groups: 4 billion euros by the end of July, another 1.8 billion from the IMF in August and the last 1 billion in October. The IMF will decide later this month on its 1.8 billion euros share of the bailout.
The partial tranche is expected to be enhanced by the rolling over of E2.5 billion of Greek government bonds held by national central banks, which will add a total of 2 billion euros for the July-October period. The official said the certain central banks still have not concluded the rollover and this will take place at a later date.
The government has also “committed to take steps to bring public administration reforms back on track,” including pushing through plans to reduce the number of civil servants, one of the required measures that has been among the most contentious — and delayed — in Greece’s reform program.
The government must put 12,500 civil servants on administrative leave by the end of 2013, with the possibility of dismissal. Those targeted include 2,200 school security personnel, 3,500 members of the Athens municipal police, which will be disbanded and most of its members absorbed into Greece’s police force, at least 2,000 local government employees, 1,500 teachers and several employees of various ministries.
They will be paid 75 percent of their normal salary and if they aren’t transferred to other state agencies within eight months of being put on leave, they will be subject to dismissal.
Municipal workers across the country went on strike on July 8 to protest the plan, while the country’s civil servants union, ADEDY, called a four-hour work stoppage from noon for all civil servants in the capital, Athens, and a demonstration in the center of the city.
Eurogroup Statement on Greece
The Eurogroup has been informed on the outcome of the third review mission under the second macroeconomic adjustment programme for Greece and welcomes the staff‐level agreement between Greece and the Troika on the updated policy conditionality underlying the programme.
The Eurogroup notes with satisfaction that the programme is broadly on track with the prior actions to be implemented shortly. Greece has made further progress in implementing the fiscal and structural reforms foreseen in the agreed policy conditionality, albeit in some areas
at a slow pace.
The Eurogroup also takes note that the economic outlook is largely unchanged from the previous review and is encouraged by the early signals pointing to a gradual return to growth in 2014.
The Eurogroup commends the authorities for their continued commitment to implement the required reforms that have already led to a
significant improvement of cost competitiveness, an impressive strengthening of the fiscal position and a more resilient banking sector. These reforms are key to bring about sustained growth and employment and to secure the sustainability of public finances. The Eurogroup
therefore expresses its appreciation for the efforts made by the Greek citizens.
At the same time, significant further work is needed over the next weeks to fully implement all prior actions required for the next disbursement. Especially, the required reforms of the public administration will need to be carried out so as to increase the efficiency of the public sector while it is being steadily downsized, and further efforts are needed to improve tax revenue collection.
Ensuring a rapid and full implementation of all the remaining reform measures, including the prior actions, is essential for mitigating risks to the programme and for bringing about sustained growth and employment and for securing the sustainability of public finances.
The Eurogroup mandates the Eurogroup Working Group (EWG) to approve the next EFSF instalment, which amounts to EUR 3.0 bn. The instalment will be disbursed in two sub‐tranches. A first sub‐tranche of EUR 2.5 bn will be approved by the EWG and the EFSF Board
following the full implementation of the prior actions and once Member States have finalised their relevant national procedures.
The disbursement of the second sub‐tranche of EUR 0.5 bn will be made in October 2013, linked to the implementation of the MoU milestones as agreed between Greece and the Troika. Furthermore, an amount of EUR 2.0 bn, equivalent to the income on the SMP portfolio accruing to euro area national central banks in 2012, will be disbursed to Greece’s segregated account.
A first part of EUR 1.5 bn will be passed on to Greece’s segregated account together with the disbursement of the first EFSF sub‐tranche.
The remaining EUR 0.5 bn will be passed on to Greece’s segregated account together with the disbursement of the second EFSF sub‐tranche.