On 14 August 2015, the Eurogroup issued a statement welcoming the agreement reached between Greece and the European institutions, with input from the IMF, on the policy conditionality underlying the new European Stability Mechanism (ESM) programme for Greece.
The ESM financial assistance facility agreement will cover an amount of up to €86 billion. This includes a buffer of up to €25 billion for the banking sector in order to address potential bank recapitalisation and resolution costs.
The Eurogroup considers that the necessary elements are now in place to launch the relevant national procedures required for the approval of the ESM financial assistance and for the ESM Board of Governors to approve the proposal by 19 August.
This will enable to unlock the initial tranche of €26 billion.
The agreement is in line with the parameters and key objectives set by the Euro summit on 12 July and provides a comprehensive framework for restoring the Greek economy to a sustainable path.
The Memorandum of Understanding (MoU) includes a wide scope of policy measures to be implemented by Greece:
- a medium-term target for a primary surplus of 3.5% of GDP by 2018 to be achieved through fiscal reform
- an ambitious reform of the pension system
- key labour and product market reforms to open up the economy to investment and competition
- financial sector measures to safeguard its stability, including a recapitalisation of the banks and urgent steps to tackle the non-performing loan (NPL) problem in the banking sector
The Eurogroup also stressed that the privatisation programme is a cornerstone of the new ESM programme. The Eurogroup welcomed the Greek authorities’ commitment to adopt new legislation to ensure transparent privatisation procedures and adequate asset sale pricing
An independent fund will be established in Greece under the supervision of the relevant European institutions by end-2015 to encompass the privatisation programme. The Greek government is expected to endorse the plan for this fund by the end of October 2015.
An assessment was conducted by the Commission, in liaison with the ECB, on the debt sustainability of Greece. The analysis concluded that debt sustainability can be achieved through a far-reaching and credible reform programme and additional debt related measures without nominal haircuts.
If necessary, the Eurogroup stands ready to consider, possible additional measures to ensure that Greece’s gross financing needs remain at a sustainable level.
The Eurogroup welcomed the intention of the IMF management to recommend to the Fund’s Executive Board to consider further financial support for Greece once:
- the full specification of fiscal, structural and financial sector reforms has been completed
- the need for additional measures has been considered
- an agreement on possible debt relief to ensure debt sustainability has been reached