EUROGROUP

Reformed Government Reform

kolotoumba, , 4 Comments

 

WOW.

Greece’s Minister of Finance Yanis Varoufakis released the proposed “first comprehensive list of reform measures [the Greek Government] is envisaging”. This list has been submitted to the EUROGROUP for assessment and further processing.

GREEK GVT REFORM AGENDA-INTRO.24.02.15.pdf

It is well structured although it is more of a policy manifesto than a “technical” document for financial ministers (the EUROGROUP members) to financially assess.  Before approved as final, this document needs to be reviewed by the EU, IMF and the ECB (formerly known as TROIKA, currently referred to as “the Institutions” as well as the 19 Eurozone Governments.

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Reformed Government Reform

Mother of all Kolotoumbas

kolotoumba, 2 Comments

Dear readers. KOLOTOUMBA needs two days to process the Eurogroup statement released on Friday 20 February. In the meantime please provide your comments.

Here is the entire statement:

Eurogroup statement on Greece

The Eurogroup reiterates its appreciation for the remarkable adjustment efforts undertaken by Greece and the Greek people over the last years. During the last few weeks, we have, together with the institutions, engaged in an intensive and constructive dialogue with the new Greek authorities and reached common ground today.
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Mother of all Kolotoumbas

But can I borrow outside of a program?

kolotoumba, , , 5 Comments

The latest update is that the Greek Government, on Wednesday February 18  Thursday February 19, will follow-up the ultimatum set by the EUROGROUP two days earlier with a “request for a loan extension”. The EUROGROUP clearly stated that they expected a “request for a program extension”.  Government officials in Greece have been making this LOAN/PROGRAM distinction very clear.

Let us step back one step:  As we presented last week, in 2010  Greece signed with the INSTITUTIONS (formerly knows as THE TROIKA – EC/ECB/IMF) the “Economic Adjustment Program for Greece”, a memorandum of understanding on financial assistance to the Hellenic Republic in order to cope with the Greek government-debt crisis.

It is this “financial assistance” that is termed now as a “loan” and for which the Greek Government is (allegedly) requesting an extension.

But by having a closer look at the actual “Economic Adjustment Program for Greece” we will read that:

The release of each disbursement to Greece must be approved by both the Eurogroup and the IMF’s Executive Board. Prior to this decision, the European Commission, the ECB and the IMF staff conduct joint review missions to Greece in order to monitor compliance with the terms and conditions of the Program.

In simplified terms, each loan installment is to be given to Greece when the Government has met a set of milestones clearly linked to specific paragraphs/terms of the MEMORANDUM OF UNDERSTANDING (a.k.a. MoU a.k.a. – God forbid – MNIMONIO) the governing document of the Program.

The following is an excerpt of an actual EC/ECB/IMF report of 11 August 2014.

troika-report-excerpt

Notice the close links of DISBURSEMENTS, MILESTONES and the MOU?

OUTCOME:  Although not yet official, there is no legal background to ask for the EC/ECB/IMF to extend the LOAN disbursements without linking them to the specific PROGRAM and the MoU sections.  Some sort of KOLOTOUMBA is to be expected by either side.

But can I borrow outside of a program?

So How Red Are Those Lines?

kolotoumba, , Leave a comment

 

Red Line

It all comes down to this:

Yanis Varoufakis: Faithful to the principle that I have no right to bluff, my answer is: The lines that we have presented as red will not be crossed. Otherwise, they would not be truly red, but merely a bluff.

This was the Greek Minister’s of Finance punchline in his op-ed article for the New York Times, published on February 16, just two hours before he entered a tough EUROGROUP meeting to discuss how Greece and its borrowers will “negotiate” the Debt (quotes are necessary since according to the Greek Government, this is not a “negotiation” but a “deposition of different views”).

Source: http://mobile.nytimes.com/2015/02/17/opinion/yanis-varoufakis-no-time-for-games-in-europe.html

So what are these “RED LINES” that the Government is drawing? According to reports leaked over the weekend:

  1. Value Added Taxes: Greece has a multitude of VATs depending on product/service offered and the region of the seller. Higher VATs result in higher income for the Government, however an increase in VAT makes a product less affordable thus leading to fewer sales. This has been an on-going chicken-and-egg debate ever since Greece entered the Financial Assistance Program.
    Red Line: No change in VATs. Current VAT percentages must remain “as is”
  2. Overtime compensation and Per-Diem expenses of Government Employees: Over the past years, public servants working in ministries, local governments, universities, public schools, etc, have seen their salaries reduced by approximately 35%. They have also suffered by the elimination of some weird bonuses such as “Bonus for Showing-up at Work On-time” and “Bonus for Washing Hands”.
    Red Line: Compensation for working overtime and allowance fees for travelling off-site shall remain “as is”
  3. Lay-off policy in the private sector: Back in the pre-austerity days, the law prohibited employers to fire more than 2% of staff over a period of one month. The reforms of the last years have made it easier for entrepreneurs to plan their work-force according to the market reality.
    Red Line: The Government needs to control all matters regarding lay-offs in the private sector.
  4. Employees’ rights to form trade unions and participate in strikes: The “INSTITUTIONS” (formerly known as TROIKA) want to impose limits to unions
    Red Line: This is a Radical Left led Government. Unions and Strikes are SYRIZA’s bread and butter. No changes whatsoever.
  5. Pension Reforms: The “INSTITUTIONS” demand that supplementary pensions should be limited, government should subsidize less in pension funds and public insurance agencies should establish zero deficit.
    Red Line: No change in laws regarding pensions and the relevant public insurance agencies.

KOLOTOUMBA Outcome: Remains to be seen but it does not look good…

So How Red Are Those Lines?