Today we welcomed two new ministers, Toomas Toniste, who is the new finance minister for Estonia, and Paschal Donohoe, who is the newly appointed Irish minister of finance. We very much look forward to working together with them. We also congratulated Edward Scicluna who, after winning the elections, was appointed for another term as minister for finance, so he will stay with us.
For today’s meeting, we also welcomed Christine Lagarde, Managing Director of the IMF, and thank you for joining us here also at the press conference. She joined us both for the Article IV discussions on the Eurozone as well as, of course, on the Greek programme. We welcomed Elke König, who is the Chair of the Single Resolution Board, and Sabine Lautenschläger, the Vice-Chair of the ECB Supervisory Board to present the first case of implementation of the European resolution framework in the Eurogroup.
Our meeting revolved mainly around Greece, and was a crucial one for the programme. I am glad to announce that we have achieved an agreement on all elements: conditionality, debt strategy moving forward and IMF participation. Christine Lagarde will speak about that.
We have issued a statement. I will therefore only present the key elements.
First, we welcomed the ambitious policy package that was fully agreed between Greece and the institutions and the adoption of the agreed prior actions for the second review.
The fiscal measures for the post-programme period that have been adopted address the underlying structural imbalances in Greek public finances. Decisive steps have also been taken to reduce NPLs and to operationalise the privatisation and investment fund.
The policy package also contains a large number of reforms to increase potential growth of the Greek economy, whilst at the same time reinforcing the social safety net. The labour and product market reforms, along with the enhanced use of EU structural funds, technical assistance and growth initiatives, will enable Greece to return to a sustainable growth path. For this purpose, the Greek authorities helped while the European institutions will work on the creation of a National Development Bank, as well as measures to spur investment.
Second, the Eurogroup discussed the debt strategy for Greece on the basis of the agreement of May 2016, last year’s agreement.
It is, first of all, essential that public finances in Greece remain on a solid track. The Greek authorities committed to maintain a primary surplus of 3.5% of GDP until 2022 and a fiscal trajectory after that, that is consistent with its commitments under the European fiscal framework thereafter.
The Eurogroup also specified further the medium term debt measures that were already in the May 2016 statement, which it stands ready to implement at the end of the programme. We confirmed that we are ready to consider a further extension of the weighted average maturities and a further deferral of EFSF interest and amortization, both up to 15 years.
In addition, we also stand ready to implement an operational growth adjustment mechanism to adjust the EFSF loan re-profiling should growth developments in the post-programme period differ from what will be expected at the end of the programme in 2018. In other words, if there is more growth, then more or faster repayment of loans can take place; if growth is less; then further lengthening or further deferral of interest could take place. We have mandated the EWG to work further on this mechanism and it will be part of the decision-making at the end of the programme, part of the medium-term debt package.
As agreed in May last year, these medium-term measures, as well as the growth adjustment mechanism, will be implemented as far as needed at the end of the programme, conditional upon its successful implementation. That is the standard language and that is still valid. The exact calibration of these measures will also be confirmed at the end of the programme on the basis of an updated DSA delivered by the IMF, in cooperation with the European institutions.
For the long term, the Eurogroup recalled the agreement that in the case of an unexpectedly more adverse scenario, an additional contingency mechanism on debt could be activated. In other words, the Eurogroup reiterated its commitment to continue to support Greece in case of a more adverse scenario than now is foreseen.
Finally, against this background, the IMF management will shortly recommend to the board… I’ll stop here, this is the kind of text that Christine, I think, would like to use.
As regards the next steps, following national procedures, the ESM governing bodies are expected to approve the disbursement of the third tranche of the ESM programme amounting to a total of €8.5 bn. Klaus Regling will say more about that figure and how it is built up.
Overall, I think this is a major step forward. The Eurogroup commends the institutions, the Greek authorities and, foremost of course, the Greek people for their intense efforts and resolve. We are now going into the last year of the financial support programme for Greece. We will prepare an exit strategy going forward to enable Greece to stand on its own feet again over the course of next year.
Other than Greece, the key issues we addressed concern recent developments in the context of the European resolution framework for banks, spending reviews and the IMF Article IV review.
We were informed by the institutions, the SSM and the resolution board, of the successful resolution of Banco Popular last week in line with the newly established resolution framework. The authorities involved in the resolution acted in a very swift manner, ensuring a continuation of core functions and with no resulting costs for the taxpayers, and this is very good news.
Last September, we adopted a set of common principles guiding the design and implementation of spending reviews. A topic that is, of course, important to finance ministers. Today, we came back to the issue to take stock of the progress achieved, on the basis of a very good paper provided by the Commission. We have identified remaining challenges and will come back to that next year, working on an exchange of best practices on this topic.
Finally, we discussed the economic and policy challenges for the euro area with the IMF managing director, following the Fund’s regular article IV review. Here good news as well: the Fund confirms the euro area economy is strengthening, with the recovery becoming more and more broad-based. I’ll leave it for Christine to say more about this.