The European Commission signed the Memorandum of Understanding (MoU) with Greece for a new stability support programme late on Wednesday. The European Stability Mechanism (ESM), Europe's firewall established in 2012 in response to the global financial crisis, will be able to disburse up to EUR 86 billion in loans over the next three years, provided that Greek authorities implement reforms to address fundamental economic and social challenges, as specified in the MoU.
Following months of intense negotiations, the programme will help to lift uncertainty, stabilise the economic and financial situation and will assist Greece in its return to sustainable growth based on sound public finances, enhanced competitiveness,
a functioning financial sector, job creation and social cohesion. As provided in
Article 13 of the ESM Treaty, the MoU details the reform targets and commitments needed to unlock ESM financing. The disbursement of funds is linked to progress in delivery. Implementation will be monitored by the Commission, in liaison with the European Central Bank and, wherever possible, together with the International Monetary Fund. This will take the form of regular reviews.
Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, who signed the MoU on behalf of the Commission, said: "With the support of the programme the Greek authorities have an opportunity to restore mutual trust, financial stability and confidence, which are preconditions for Greek economy to grow again. Now it is important to swiftly implement the agreed reforms. This will allow Greece to restore the competitiveness and to ensure sustainable economic growth."
Commissioner Pierre Moscovici, responsible for Economic and Financial Affairs, Taxation and Customs, said: "The conclusion of this programme is great news for Greece and the European Union as a whole, creating conditions for more growth, stability, investments and jobs. Combining solidarity and responsibility, Greece, the other euro area members and the Institutions open a new chapter, based on reforms, fairness and shared trust."
Marianne Thyssen, Commissioner responsible for Employment, Social Affairs, Skills and Labour Mobility, said: "This Commission has made it a priority to put socially fair adjustments at the core of new support programmes. Today we have delivered for the first time on this commitment by thoroughly assessing the social impact of the new programme for Greece and making sure it is socially fair and protects the most vulnerable throughout."
In line with President Jean-Claude Juncker's Political Guidelines, the Commission, as a partner in the negotiations, has paid particular attention to the social fairness of the new programme to ensure that the adjustment is spread equitably and to protect the most vulnerable in society. The Commission publishes today an assessment of the programme's social impact and concludesthat, if implemented fully and timely, the measures foreseen in the programme will help Greece return to stability and growth in a financially and socially sustainable way, and will contribute to meet the most pressing social needs and challenges in Greece.
Examples of the Commission's focus include:
- phasing in a guaranteed minimum income scheme and providing universal health care,
- ensuring that the effort required from everyone is proportionate to their income,
- targeting savings in areas which do not directly affect the wallets of ordinary citizens, such as reduced defence expenditure, or by addressing inefficiencies in many areas of public spending,
- challenging vested interests, such as phasing out favourable tax treatments for
ship-owners or farmers, or a myriad of exemptions, e.g. for some islands on VAT rates, or of unjustified subsidies,
- supporting the role of the social partners and the modernisation of the collective bargaining system,
- fighting corruption, tax evasion and undeclared work,
- supporting a more transparent and efficient public administration, including through moving towards a more independent tax administration, the reorganisation of ministries and the introduction of a better link between salaries and job responsibilities.
To complement the programme and to give it the best chance of success, the Commission presented a Jobs and Growth Plan for Greece on 15 July. Some EUR 35 bn will be made available to invest in people and businesses by 2020. By increasing the rate of initial pre-financing for funding programmes for 2014-2020 in Greece by 7 percentage points,EUR 1 billion of the country allocation can be made available faster to frontload new projects co-funded by the EU.
The Commission is also gearing up its offer of technical assistance and expertise, through its new dedicated Structural Reform Support Service. The SRSS, established in July, will serve as a hub to mobilise expertise from the Commission services, Member States' administrations and other international organisations to help with the design and monitoring of reforms.
On 8 July 2015, the Hellenic Republic (‘Greece’) made an official request for stability support – in the form of a loan facility – to the ESM to be used for meeting debt obligations and to ensure stability of its financial system. A separate request for financial assistance was sent to the International Monetary Fund (IMF) on 23 July 2015.
On 12-13 July, a Euro Area Summit took stock of the situation and issued a detailed statement on the way forward.
On 15 July and 22 July, the Greek authorities passed several sets of legislation, as foreseen in the statement of the Euro Area Summit.
On 17 July, the Eurogroup asked the Institutions to start the negotiations on a MoU detailing the conditionality for a financial assistance facility covering the period 2015-18, in accordance with Article 13 of the ESM Treaty. The work was carried out by the European Commission, in liaison with the European Central Bank, and in cooperation with the International Monetary Fund and the European Stability Mechanism.
On 11 August, the Greek authorities and the Institutions reached a staff level agreement on the MoU, and euro area finance ministers endorsed it politically on 14 August.
The Greek authorities passed another set of legislation on 14 August (so-called "prior actions").
Following approval by national parliaments (where applicable), the ESM board of governors approved the MoU on 19 August. It was then signed by the Commission, on behalf of the ESM, as well as by the Greek government and central bank.
This is the ESM's third programme after Cyprus and Spain.
The role of the European Commission in these programmes and its legal foundation is laid out in and agreed to by the euro area Member States in the ESM Treaty:
- to assess the need and justification for stability support; this is done in liaison with the ECB (see Article 13(1) ESM Treaty).
- to negotiate the Memorandum of Understanding with the Member State in question, detailing the conditionality attached to the financial assistance; this is done by the Commission in liaison with the ECB and, wherever possible, together with the IMF (see Article 13(3) ESM Treaty).
- to sign the MoU on behalf of the ESM (see Article 13(4) ESM Treaty).
- to monitor compliance with the conditionality attached to the financial assistance facility; this is done by the Commission in liaison with the ECB and, wherever possible, together with the IMF (see Article 13(7) ESM Treaty).