Eurogroup: Approval for short-term debt relief; fiscal targets remain, review pending

The Eurogroup issued a Delphic announcement on Monday afternoon regarding the closely watched and still unresolved second review of the Greek program (third bailout), announcing previously leaked short-term measures, praising progress towards the review but insisting that the fiscal target of a 3.5-percent budget surplus goal should be “maintained in the medium term”.

Highlights of a half-hour press conference after the meeting with the participation of Eurogroup chair Jeroen Dijsselbloem, EU Commission Pierre Moscovici and ESM Managing Director Klaus Regling included:

• The Dutch finance minister and Eurogroup president noting that medium-termed debt relief measures will be used “if necessary” at the end of the Greek program, mid 2018
• “Will need to be in line with the framework, targets defined at latter stage, in order to take this program to a successful conclusion,” was Moscovici comment.
• Regling: We will start implementing over next few weeks and implementation will take some time.
• Dijsselbloem emphasized that it’s necessary to finalize the second review so that debt relief measures are implemented.
• Dijsselbloem: More than two opinions on fiscal targets, “heard 19 around the table”, at this point not very relevant.
• As fiscal trajectory is set for 2017 and 2018, we’ll need to set (future targets) in 2018, in any case, structural measures are necessary, whether that is three, or five or 10 years … to achieve the target of 3.5 percent in 2018 and maintain it for some years to come,” Dijsselbloem stated, while offer little in terms of the duration of "medium term".
• IMF representatives reconfirmed that they will propose a new financing arrangement to the IMF board once upon a staff-level agreement is reached.
• Dijsselbloem on labor sector liberalization in Greece: you cannot expect ministers to go into details of collective wage bargaining, deep and substantive reform is necessary and for it to comply with best European practices … we’ll listen to the experts’ group.
• Whether three or five doesn’t matter to us, what we need is structural measures that deliver 3.5 percent (annual budget balance), once you have it you can sustain for a longer period. Serious structural reforms the goal.  

Regling added that the short-term measures are an important step towards ensuring the debt’s sustainability, something repeatedly demanded by the IMF in order to return to the program as a lender. 

Beyond debt relief,  Dijsselbloem said open issues still needed to be resolved over the second review, pointing to 2017.