European Union Finance Ministers Urge Greece to Speed Up Reforms

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As European finance ministers gathered in Bratislava, Greece was back on the agenda on Friday.

“The summer is over, pack up the camping gear,” the sprightly Dutch finance minister said, adding that time had already been lost over the summer in implementing the third Greek bailout.

While European Union officials have stressed that alarm bells are not yet ringing about Greece, the issue is likely to come to a head by the end of October as liquidity pressures loom.

Some €7.5 billion of the €10.3 billion disbursement agreed for Greece under the third Greek bailout was distributed to Athens before the summer, but the remaining €2.8 billion will not be paid until 15 previously agreed milestones are agreed.

Optimistic

EU economics Pierre Moscovici appeared optimistic that this could be achieved by the end of October, welcoming the “intensification of efforts on the part of the Greek authorities” in recent days, but stressing that more work needed to be done.

European Central Bank board member Benoit Coeuré said the bank would also be returning to Athens, but its primary focus would be on whether the country’s four systemic banks were shaking up their boards as requested, and whether the Greek government followed through on promised court and other legal reforms.

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Serious discussion on debt sustainability will be for later in the year, however, with Mr Dijsselbloem affirming that the assessment would look at short-, medium- and long-term measures to address Greece’s debt profile as set out by the eurogroup in May.

Greece’s European lenders know that the issue is crucial for the International Monetary Fund’s involvement in the third Greek bailout, though they expressed confidence that the Washington-based fund would come on board.

While Greece’s finance minister updated his counterparts on the progress of the Greek bailout, the country’s prime minister, Alexis Tsipras, was hosting a “Club Med” gathering of southern European countries for a mini-summit at which he urged a loosening of EU fiscal rules and a rethinking of “austerity”.

Asked about the Greek premier’s comments, Mr Dijsselbloem looked unimpressed. “The use of the word ‘austerity’ has been politicised to a high level. Getting public finances to a sustainable level: that requires work . . . It needs to be done,” he curtly said.

Still, the recent leniency shown towards Spain and Portugal over their budget targets may suggest that the European Commission is softening its touch. EU leaders and finance ministers, even in Berlin, are aware that the bloc needs to show a softer side to citizens as it engages in some soul-searching following the British referendum blow.

Fiscal centralisation

A similar sentiment informed a discussion yesterday on the need for greater fiscal centralisation.

A paper presented by Brussels think tank Breugel and discussed by finance ministers urged the euro area to integrate further. “A monetary union without fiscal union is generally considered to be incomplete,” it said.

But with the banking union still incomplete and Germany unwilling to embrace any great leap forward, moves towards further fiscal integration appear relatively remote. It’s a trend that is likely to be welcomed by Ireland, which is wary of fiscal centralisation that could ultimately intrude into the domain of taxation.

Unsurprisingly, the commission’s record finding against Ireland was the other main topic of discussion at the fringes of the eurogroup and Ecofin meetings. Despite Minister for Finance Michael Noonan’s belief that other countries would weigh in behind Ireland’s legal appeal, finance ministers – publicly, at least – were unwilling to back Ireland.

Instead countries such as Spain, Austria, France and Italy were examining how to go about getting their hands on a proportion of the €13 billion that competition commissioner Margrethe Vestager said they may be entitled to.

While the Danish commissioner’s ruling against Ireland has caused ructions in Dublin, it has also opened up a legal quagmire for other EU countries. Despite encouraging other EU member states to assess whether they can lay claim to some of Ireland’s untapped bonanza, the EU’s competition division now says that implementing this is nothing to do with them and is up to national authorities.

As EU member states await new EU rules on country-by-country reporting and an imminent proposal on a revised common corporate tax base, it will fall to member states to assess if they want to initiate a tax-recovery process that is likely to last years.

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