According to a news bulletin issued by Greece’s Secretariat General for Communication, the Greek Parliament had approved the “omnibus bill” with regard to the “emergency measures for the negotiation and agreement with the European Stability Mechanism (ESM).”
Among the parliament, the bill received an overwhelming majority of votes with 229 voting in agreement and only 64 voting against it.
As he addressed the Greek Parliament, Greece Prime Minister Alexis Tsipras stressed that one of the things made available to them now is the chance to restructure their debt.
He explained, “With the loan from the European Stability Mechanism [ESM] we will repay the Greek bonds held by the European Central Bank totaling 6.8 billion, and maturing in July and August. This conversion of short-term to long-term debt, with lower interest rates –the ESM provides for such an opportunity, lower interest rates and possibly of a rollover of repayments, which I will address later on– is the equivalent of the debt being restructured. Therefore, the assumption of the country’s total debt and financial requirements by the European Support Mechanism de facto provides possibilities of converting short-term debt to long-term debt.”
Moreover, Tsipras stated, “Authorizing the Minister of Finance at such a critical moment is not simply an ordinary matter requiring a vote. It is a vote of conscience of high political importance, because it concerns our future. And obviously it is a choice of conscience, but also of high national responsibility.” Later on, he added, “Our national duty calls for making difficult decisions. I am sure that we will live up to this responsibility and we will succeed.”
Following the Euro Summit held last July 12 to 13, the European Commission has announced a Jobs and Growth Plan that “is meant to flank the comprehensive set of reforms that could form part of a programme under the European Stability Mechanism (ESM) to be negotiated in the coming weeks between Greece and its international partners.” The said plan will fund Greece with over €35 billion till the year 2020 in support of its economy, so long as the Euro Summit conditions are met.
As Vice-President for the Euro and Social Dialogue Valdis Dombrovskis has explained, “The European Commission can mobilise more than €35 billion from EU budget to support growth, jobs and investment in Greece. It can provide much-needed support to help lift the Greek economy at a time of dramatic decline in investment. This support alone will not be enough to ensure a lasting recovery. It needs to be underpinned by fundamental reforms that address long-standing structural weaknesses in the Greek economy.”
Moreover, EU Commission President Jean-Claude Juncker stated, “Following Monday’s Euro Summit agreement, the European Commission is willing to step this up even further to help Greece unleash a significant economic rebound and to give the proposed reforms the best chance to work: these €35 billion can help make Greece an attractive location for investment and give hope to especially the younger generation. After at times painstaking months of negotiations, we now need to look to the future. This new start for jobs and growth is the Commission’s contribution. I trust the European Parliament and Member States will play their part so we can unlock the money swiftly.”
As far as jobs in Greece go, the International Monetary Fund (IMF) has stated in its update of Greece Debt Sustainability Analysis that Greece is expected to excel in productivity growth and labor force participation rates within the Euro zone. But the IMF is also quick to remind that the precondition for this to happen involves “very ambitious and steadfast reforms.”
Moreover, with regard to Greece’s public debt, the IMF believes that it has now become “highly unsustainable.” The IMF explained, “This is due to the easing of policies during the last year, with the recent deterioration in the domestic macroeconomic and financial environment because of the closure of the banking system adding significantly to the adverse dynamics.”
The IMF now believes that Greece needs as much as €85 billion in financing till the end of 2018 and that “Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far.” It concludes that what was proposed by the ESM will not be enough to sustain Greece sustainability.
For one, a debt relief via a maturity extension would mean extending the grace periods to about 30 years for Greece’s European debt. This will also have to be accompanied with “new assistance.” In addition, the IMF has also stated that other options would include “explicit annual transfers to the Greek budget or deep upfront haircuts.”
Meanwhile, Reuters reports that the European Union finance ministers have approved €7 billion in bridge loans to allow Greece to make a bond payment to the European Central Bank next Monday as well as clear its arrears with the IMF. The said loans shall be finalized soon as Germany’s parliament approves opening talks about Greece’s three-year bailout program. On the other hand, Greece banks will reportedly reopen on Monday.