Better late than never.
After many hours of uncertainty, the European Commission this morning announced what everyone had been waiting for. The Greek government’s list of proposed reforms, required for Athens’ E.U. partners to approve an extension of the country’s current bailout, had reached Brussels “on time” at midnight Monday, according to a statement on Twitter from the Commission’s chief spokesman.
The move likely brings to an end – at least for now – a political crisis that had threatened to force Greece out of the 19-nation euro currency zone as soon as the end of this month.
Greece is now widely expected to get a four-month lifeline extension of its €240 billion existing bailout from European creditors and the International Monetary Fund. The temporary extension gives negotiators between Athens and Brussels time to reach a more permanent solution that will end the question of whether Greece can remain in the euro zone for good.
Jeroen Dijsselbloem, who heads the euro group of finance ministers from the currency bloc, said Athens’ release of its reform list marked a “positive” step.
Further work is needed for Greece to propose a fully-fledged reform plan by the end of April. The situation for Greece will remain shaky as it looks for short-term ways to keep its finances above water, while the European Central Bank is expected to keep emergency loans to Greek banks flowing.
The euro zone's 19 finance ministers backed the deal after a hastily-arranged conference call Tuesday afternoon, in a statement saying they "agreed to proceed with the national procedures" for approve a four-month extension of Athens’ existing aid program. The next step is for each of the 19 euro zone governments to agree to the extension - in some cases with a vote in parliament.
Jeroen Dijsselbloem, who heads the euro group of finance ministers from the currency bloc, said earlier Tuesday that Athens’ release of its reform list marked a “positive” step. The priority now was simply to “get the program or agreement back on track” between the European Union and Greece.
Even in Germany, plans are now underway for a temporary extension of the program to be approved by the country’s parliament, the Bundestag. Berlin has by far been the government most skeptical of Athens’ efforts to renegotiate the terms of its bailout with European creditors ever since the left-leaning and anti-austerity Syriza Party took power in January.
Wolfgang Schäuble, the German minister of finance, applied for the Bundestag to vote on a four-month extension to the Greek aid program late Monday evening. He noted that the application was conditional on the list of measures reaching Brussels and that the proposals it contained were deemed sufficient for Greece to complete its current reforms.
Greece would also have to agree to submit to ongoing controls by the three institutions – the European Commission, International Monetary Fund and European Central Bank – that have been monitoring the Greece bailout program over the last five years, according to a four-page letter Mr. Schäuble wrote to the president of the Bundestag Norbert Lammert, seen by Handelsblatt.
The so-called troika of monitors has proved massively unpopular in Greece, seen as imposing budget-cutting austerity that has doomed the country's economy. The name is likely to be dropped, but Mr. Dijsselbloem said all three institutions would still have a role to play in monitoring the program.
Mr. Schäuble’s letter enables Germany’s parliament to vote on an extension of financial aid to Greece by the end of the week.
“Against the background of Greece’s acknowledgment of its obligations and with the agreement within the euro group, the German government approves the extension,” Mr. Schäuble wrote.
“Some of the program’s flexibility can be applied,” Mr. Schäuble wrote, adding that what mattered was “that these are reviewed by the three institutions previously known as the troika.”
For Mr. Tsipras, the biggest challenge in the short term could be keeping his divided coalition together. Holger Schmieding, Berenberg Bank
Mr. Schäuble’s recommendation is a move to unite German politicians in support of extending the aid program. In recent days some politicians have called for the government not to ease the pressure on Greece, arguing that German taxpayers should not have to bear the burden of the country’s debts.
By Monday evening, the Greek government had already produced a draft of the list in discussion with representatives from the European Union, European Central Bank and the International Monetary Fund. It was a rocky process, insiders close to the negotiations said: “It’s still difficult.”
The Greek government has applied to change a third of the conditions that have been imposed on Greece, exchanging them for new measures.
The list of measures and acceptance of controls represent a compromise by the Greek government which had won the elections in January promising to free the country from the austerity measures and the controls by the troika. Alexis Tsipras, the country's new prime minister, said these measures have forced the country into a humanitarian crisis. The continued reviews by the troika are the biggest compromise, observers said.
The reform plans include efforts to close tax loopholes and tackle corruption, as well as cutting bureaucracy and combating poverty, according to sources close to the government in Athens.
The European Commission, ECB and IMF all issued statements by Tuesday afternoon, welcoming Greece's proposals and saying they marked a valid starting point for discussions and to complete the review.
The vice president of the European Commission, Frans Timmermans, called on the government in Greece to stick to its reform promises.
“There isn’t much room for maneuver. These reforms have to be made. We don’t have many alternatives,” Mr. Timmermans said on a German news program early Tuesday.
At the same time, he also warned against excessively high expectations. “We have to be careful. In the last few weeks, we’ve seen how difficult it was to negotiate with the Greeks.”
Whether the new reform proposals are accepted by the Greek public, which had voted in Syriza on a wave of change, remains to be seen.
The latest moves by the Greek government were criticized by politicians within the party of Mr. Tsipras, who was accused of betraying his election promises. Mr. Tsipras had pledged measures to ease poverty among Greeks and had resisted calls for far-reaching reforms until this point.
“For Mr. Tsipras, the biggest challenge in the short term could be keeping his divided coalition together,“ said Holger Schmieding, chief economist of Germany's Berenberg Bank.
The Greek vice foreign minister Nikos Chountis said that the government had not abandoned its main goal to ease the country’s burden with a debt haircut. Negotiations over this would continue after the extension of the aid program, he said.
The Greek government had few options left but to meet E.U. demands, as time was running out for an extension to the aid program. Without more money from lenders, the country will no longer be able to pay its debts in the coming days.
Greece’s situation has also poses risk for the European lenders who have already extended €240 billion, or $271 billion in aid to Greece since 2010; much of this would be lost if the country’s government were to go bankrupt.
The Greek environmental minister Panagiotis Lafazanis attacked Germany for insisting that Greece continue to make cuts. “If the Germans let it get to a break, they’ll have to answer for the catastrophic consequences,“ he said.
Jan Hildebrand is a political correspondent for Handelsblatt in Berlin. Allison Williams and Christopher Cermak are editors for the Handelsblatt Global Edition in Berlin. To contact the authors: [email protected], [email protected] and [email protected]
This story was updated at 1600 CET folllowing the euro group's backing of the Greek reform proposals.