International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, February 25, 2015

Greece Granted 4 Months and Billions More of EU Funds

Greece has 'promised' to undertake reforms, like fight corruption and tax evasion, stop luxurious in-kind benefits for politicians, and yet in the same letter stated it would spend even more for social programs like rolling out nationally a minimum wage.  

EcbThe EU Commission and IMF have, in response, given Greece a "pass" of an additional four more months and another E7 billion more from the EU Central Bank (i.e. German taxpayers) and the IMF.   Greece can borrow up to E240 billion under the current plan versus its E182 billion GDP (2013), though it has already reached 175% public debt to GDP.

Greece does not have to meet month by month milestones - no timeline for reforms.  Chalk up a big win for Greece!  When in debt, borrow more, much more, until the creditors (the ECB primarily) have no choice but to meet demands for substantial forgiveness to squeeze out any repayment.

Several commentators are pointing to Greece's past five years of lack of action of reform progress, the inability to collect tax, and the lack of willingness to stop public employee corruption.  This can has been kicked down the road until June.  Perhaps Greece will discover oil by then?  Oops - at $60 a barrel, not going to dent US$270 billion of debt.

Greece's Reform Proposals to Obtain 6 More Months of Borrowing from EU Central Bank and IMF

Greece's Formal Request for 6 Month Extension 

EU Commission Statement on Greece Debt Proposal (24 Feb 2015)

The Commission underlines its willingness to continue to provide technical assistance in key areas to assist in the design and implementation of policies. As part of this process, the Commission underlines the importance of Greece fully respecting its commitment undertaken at the Eurogroup of 20 February 2015 to refrain from any roll back of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.

IMF Statement on Greece's Debt Proposals

DownloadWhile the authorities’ list is comprehensive, it is generally not very specific, which is perhaps to be expected considering that the government is new in office. In some areas, like combating tax evasion and corruption, I am encouraged with what appears to be a stronger resolve on the part of the new authorities in Athens, and we look forward to learn more about their plans. In quite a few areas, however, including perhaps the most important ones, the letter is not conveying clear assurances that the Government intends to undertake the reforms envisaged in the Memorandum on Economic and Financial Policies. We note in particular that there are neither clear commitments to design and implement the envisaged comprehensive pension and VAT policy reforms, nor unequivocal undertakings to continue already-agreed policies for opening up closed sectors, for administrative reforms, for privatization, and for labor market reforms.

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