The Eurogroup concluded yesterday that the necessary elements are in place for the approval of the next EFSF installment, which amounts to €7.5bn. The disbursement will take place in two sub-tranches: A first sub-tranche of €4.2bn will be approved by the EWG and the EFSF BoD in the following days, following the completion of the national procedures and the full implementation of the prior actions. The disbursement of the second sub-tranche of €3.3bn will be made in June, linked to the implementation of the MoU milestones as agreed between Greece and the Troika.

Mr Jeroen Dijsselbloem, President of the Eurogroup.

The Eurogroup noted with satisfaction that Greece has made further substantial progress in implementing the fiscal and structural reforms foreseen in the agreed policy conditionality. The Eurogroup commends the authorities for their continued strong commitment to the adjustment program and reiterates its appreciation for the efforts made by the Greek citizens.

The Eurogroup took also note that the economic outlook is largely unchanged from the previous review, with continued prospects for a gradual return to growth in 2014. Eurogroup welcomes that fiscal performance in 2012 complied with the program targets and that this is expected to continue in 2013 and 2014. Greece is quickly regaining cost competitiveness, but product and services market reforms will need to accelerate to allow gains in cost competitiveness to translate more rapidly into prices.

The Eurogroup welcomes the important measures taken with a view to strengthening the organisation and effectiveness of the revenue administration which, coupled with the reform of the tax system adopted last January and other on-going steps to enhance tax procedures, should improve revenue collection.

Strong resolve will be needed in the establishment of the new organisational structure and the fight against tax evasion. This is essential to ensure a more balanced and fair distribution of the adjustment and to support the achievement of fiscal targets. The Eurogroup equally welcomes the steps taken to fully recapitalise Greek core banks and to consolidate the banking system. However, further work is needed to fully implement the entire list of prior actions.

The Eurogroup stresses that it will now be important to ensure a rapid and full implementation of all the remaining reform measures, including the prior actions, which are key for the smooth functioning of the economy and to create the conditions for more innovation and stronger productivity growth, and new opportunities for business and job creation. This will contribute to bringing about sustained growth and employment and to secure the sustainability of public finances, thereby fully delivering the program objectives.

During the press conference EU Commissioner Olli Rehn said that there is a slightly larger fiscal gap in 2015-16 compared to previous forecasts, yet stressed it is too early to say if additional measures are required as growth could be larger than currently estimated. He also said that the next troika review mission to Greece is expected in the coming weeks.

EC draft report
According to an EC draft report obtained by Reuters, Greece will hit its fiscal targets in 2013-14m but there is a fiscal gap of €8bn for 2015-16 (1.8% of GDP in 2015 and 2.2% of GDP in 2016).

Same report notes that progress on privatising state assets is unsatisfactory, but Greece’s overall debt outlook remains unchanged as it steps up budget cuts. Furthermore, the target for 2013 privatisation revenues had been trimmed to €2bn from €2.6bn, while it is predicted that Greece would take several years to fully return to capital markets once funding of the bailout program ends in 2014.

Euroxx / Greek Market