11/2/2015 – YANIS VAROUFAKIS TALK IN THE
11TH FEBRUARY 2015 EUROGROUP MEETING

Mr President,
(Jeroen Dijsselbloem)

Dear
Colleagues,

It is a great
honour for me to join this Eurogroup meeting as finance minister in the newly
elected Greek government.

On January 25th,
the Greek people strongly mandated us to terminate the cycle of austerity that
has caused economic damage and immense social costs. 

The new
government led by Alexis Tsipras has committed to bring back hope, dignity and
pride to Greek citizens and to implement a comprehensive policy agenda to deal
with the roots of Greece’s socio-economic under-performance.

For five years
now, many of you have spent endless hours discussing ways and means of dealing
with yet another episode of the endless saga that seems to be the Greek crisis.

I understand
your fatigue. I understand that Europe has had enough of Greek dramas. But
believe me: The Greek people themselves have had much more than enough of it
too.

It is our aim
and hope that this meeting, and maybe one or two more, will be the last ones to
feature Greece on the agenda. My government was elected in order to stabilize,
to reform, to grow Greece and thus to take it out of the headlines and off the
Eurogroup’s future agenda.

But first
things first. First, we must earn a very precious currency without depleting an
important capital good: We must earn your trust without losing the trust of our
people – of the voters amongst which we enjoy, for now, sizeable approval
ratings. For such approval is an important capital good in Europe’s struggle to
sort Greece out and to render it stable and, indeed, normal.

In this time of
change, we hear your concerns about our government’s intentions. We need,
clearly, to put them to rest.

I am here today
to convey to you a clear message on the new government’s program and
commitments to its Eurogroup partners.

(Government Commitments)

Greece, as a
member of the Eurozone, is fully committed to find a solution jointly discussed
between partners, in order to strengthen our monetary union.

We are
committed to cooperate in good faith with all our European and international partners, on an equal footing.

We are
committed to sound public finances. Greece has made a vast adjustment
over the past five years at immense social cost. Its deficit is now below 3% in nominal terms, down
from 15% in 2010. Its primary surplus has reached 1.5% at the end of last year,
its structural balance, as measured by the IMF, has reached a surplus of 1.6%,
the best performance in the EU.

The new government takes this adjustment as its point
of departure. We wish now to move forward, on the basis of a new mutually
beneficial partnership with our European partners.

We are
committed to deep structural reforms.

Our reform
agenda aims at re-creating confidence among Greek citizens, growth in the
economy, and credibility in Europe. It recognizes the need for deep reforms to
anchor the long-term prosperity of Greece within the Eurozone.

Our government
will be the most reform-oriented government in Greek modern history, and among
the most enthusiastic reformers in Europe. Why? Simply because we are not tied
to any interest groups. We will deliver results for the people, not for friends
or patrons.

We will not
only commit to reforms, we will deliver them.

This morning
the OECD Secretary General has agreed to assist us in this task. Your help, the Commission’s help, the IMF’s help, will also be
necessary in important areas where powerful opposing interests
are entrenched and the political challenges are especially great. We may be an
inexperienced government but we have sizeable support from a fed up population
to cut through not just red tape but also to cut through the Gordian knot of
vested interests.

We stand ready
to support structural reforms previously agreed with our Eurogroup partners
with regard to tax collection, public financial management, public
administration reform, improvement of the business climate, reform of the
judiciary, spatial planning and fight against rent-seeking. They are fully
consistent with our political mandate, and we will even accelerate them. 

We will take
unprecedented action to fight corruption, to fight tax evasion and ensure tax
enforceability, with an emphasis on transfer pricing in large corporates active
abroad.

We want to
discuss legislative proposals to reinforce the legal framework for an
independent tax authority.

Technical assistance from you on these issues will be
critical, not least because it will enhance trust between us and you.

A full
legislative package will create favourable conditions for the economy, improve
the business climate and undermine rent-seeking, in particular in the oil
sector, procurement, the construction sector, the financial sector, and the
media.

We will make
public procurement procedures more transparent thanks to a more centralized
system, efficient monitoring and e-procurement.

We will improve
the overall efficiency of the public sector to increase the quality of services
delivered to every citizen and tackle administrative burden.

In addition, we
will propose a new set of home-grown reforms to support investment, restart
growth, and improve economic efficiency.

Investment
should be revived, in Greece and in the whole Europe.

We want to revive infrastructure projects with public
and private investors and the support of the EU. Indeed, we have some
innovative ideas of our own that may help mobilize idle savings into productive
investments throughout the Continent, in support of the current efforts of the
Commission to enhance investment and of the European Central Bank to stem
deflationary forces.

Returning to Greece, we want to invest to reduce
energy costs for medium and large scale industries, to support innovation,
start-ups and to promote a shift towards sectors with comparative advantages
and export potential such as pharmaceuticals, organic agriculture, light
manufacturing, energy resources, with the emphasis naturally on renewables.

Quick fire sales of public property, at a time when
asset prices are deeply depressed, is not something that anyone would advocate.

Instead, the government will create a development bank which will
incorporate state assets, enhance their equity value through reforming property
rights and use them as collateral for the purposes of providing, in association
with European investment institutions such as the European Investment Banks,
funding to the Greek private sector.

We want to take
additional measures to clean-up non-performing loans in the banking sector to
render the banks able to support SMEs and households.

Several
misleading reports have caused misunderstandings with our partners by
insinuating that we have rolled back previous reforms and added to our state
budget. On the contrary, the measures announced by the Prime Minister with
respect to rehiring tax office cleaners, school guards and the staff of the
public broadcasting network: (1) have no adverse effect on competitiveness and
(2) have no fiscal bearing as they will be paid for entirely by other savings
in the state budget. For example, the wrongfully dismissed staff that will be
rehired number 2013 people, a tiny number that must be juxtaposed against the
15 thousand hirings that are already inscribed in the 2015 budget that the
previous government passed.

On two other
emotive topics, let me clarify that the restoration of the pension cuts we
announced concern pensioners living at or below the poverty line and comes up
to less than 2 euros per day per eligible pensioner – at a grand total of
around 9.5 million. The reason we made this announcement is one that I shall
return to, as I must, during our discussions: The appalling humanitarian crisis
caused by the debt-deflation.

On the minimum
wage, the government will phase in its restoration to the 2012 level gradually,
from September onwards and after consultation with employers and trades unions.
As it applies only to the private sector, its fiscal impact will be, if
anything, quite positive, as its multiplier effect is large and likely to boost
tax revenues beyond the affected employees. Will it reduce competitiveness of
the private sector? The government commits to reforms, e.g. in social security,
reducing the tax wage that will ensure it does not.

(A New Partnership)

The new
partnership we propose to you should be based on realistic goals and efficient
policies.

We recognize
that the previous adjustment program reflected commitments made by both Greece
and its Eurogroup partners.

We recognize
the tremendous efforts made by your countries’ taxpayers to support Greece’s
debt and maintain the integrity of the euro.

However, unrealistic, self-defeating fiscal targets
have been imposed on our country and population and hence must be revised. A
primary surplus target of 4.5% of GDP year-in-year-out has no historical
precedent in any situation resembling that of Greece today. It will simply not
be possible for our country to grow if we remain on the growth sapping
austerity path imposed on our economy. It is also quite inconsistent with
achieving a sustainably reduced debt-to-GDP ratio.

The new
contract we propose to discuss with you should recognize this evidence.

Continued
primary surpluses will remain our mantra. We propose a maximum 1.5% of GDP
primary surplus objective, from as soon as the present disturbed economic
situation has stabilized and for as long as necessary to achieve the
underlying goals. This objective can be shown to be sufficient, under very
reasonable assumptions, to put the debt trajectory on a downward path.

The new
contract will build upon reforms that are ‘owned’ by citizens’ and domestic
institutions, using many elements from the previously agreed policy agenda. This
also means that the hope of shared prosperity must be revived.

We wish to
discuss with you this home-grown agenda that reflects both our potential and
specific constraints. We wish our growth to be inclusive, based on investment,
and productivity gains. Growth based on further labour cost compression cannot
work in Greece and has been rejected by our people.

Based on more realistic primary surplus targets and
our home-grown, wholly owned, reform and growth agenda, the new contract we
propose will restore a sustainable debt trajectory. 

We invite the IMF to work with us to assess Greek debt
sustainability building on the government’s commitments. This new DSA should
reflect the concessional features of Greek debt due to its very long maturity
and low interest charge.

It is probable however that additional measures will
be required to ensure Greece’s capacity to re-access the financial markets.

Eurogroup committed in November 2012 to tackle this
issue once Greece would post primary surpluses, which was the case in 2014 and
will be the case in 2015 once the current situation stabilizes. This discussion
should be reopened when we will discuss our new contract. 

Greece will stand ready to make concrete proposals to
its partners, in due time, on a menu of innovative instruments to reduce the
debt burden efficiently, including debt swaps.

Moreover, we believe that a broader discussion on debt
issues in Europe is necessary. We welcome Mr Dijsselbloem’s recent statement in
our joint press conference in Athens that the Eurogroup is the proper forum to
act as a permanent European debt conference, addressing debt problems in Euro
area member States. We therefore propose to create a specific Eurogroup working
group gathering member states’ representatives and experts. 

(A Bridge Program)

Agreeing on a new policy framework between Greece and
its Eurogroup and international partners will take some time.

In the meantime, covering Greece’s financing needs
over the next months is an immediate concern for all of us.

Until June, Greece faces €5.2bn payments to the IMF:
our government is fully committed to honor these payments, possibly directly to
the IMF.

To meet our immediate payment obligations, we ask the
Eurogroup to disburse to Greece the outstanding €1.9bn SMP bond-related
Eurosystem income, in accordance with its previous commitments. We are, in
fact, open to the idea that the ECB transfers these funds directly to the IMF in
lieu of Greece’ outstanding repayments.

Moreover, we propose to work urgently on a bridge
financing mechanism to ensure Greece’s liquidity position over the coming
months.

In July and August, €6.7bn repayments are scheduled to
the ECB (as the holder of SMP bonds), on top of additional payments to the IMF.
These payments create very exceptional pressure on Greece’s funding needs in
2015.

We are confident that an agreement can be reached
before the summer, notably with the IMF’s input, that would provide solutions
and funding sources to cover these needs.

(Technical Extension)

Let me conclude now on the technical and legal issues
concerning the existing loan agreement.

We fully understand that the dates associated with the
existing loan agreement must be moved forward in order to provide stability, to
give time to the discussions, and allow for the disbursement of SMP
bond-related funds and possibly other funds. We remind you that the present deadline
of 28/2/2015 are entirely artificial, and were the product of the previous
government’s electoral strategy and desire to confront us with these
difficulties on taking office. It is time, in good faith, for these maneuvers
to stop and for serious work to begin.

We stand ready to ask for a revision of these dates in
view of the next scheduled Eurogroup meeting next Monday the 16th of February
2015.

However, let me be very clear on this: the government
asks for this revision of dates on the condition that it is the starting point
for genuine negotiations in good faith for forging a different contract between
us, based a realistic primary surplus effort and efficient as well as socially
just structural policies – including of course many elements of the previous
program that we accept. We need assurances on this point.

We can accept this revision of dates as a “bridge”
towards a new partnership and a necessary condition for the discussion.
However, such an extension cannot be taken as acquiescence to the logic and
parts of the former agenda that have been rejected by our people.

We propose the bridge program to cover the period
until end-August. This will provide sufficient time to agree on the terms of
our partnership. A partnership that will bind our side to deep reform but also
acknowledge and address Greece’s hideous humanitarian crisis, the
non-availability of credit even for profitable firms, and the urgent need for
investment-led growth.

Dear Colleagues,

Europe is whole and indivisible, and the government of
Greece considers that Greece is a permanent and inseparable member of the
European Union and our monetary union.

Surely there are various ways to foster policies that
will truly nurture and enhance economic growth, maintain fiscal and financial
stability, and address the most pressing needs of the people.

Some of you, I know, were displeased by the victory of
a leftwing, a radical leftwing, party. To them I have this to say: It would be
a lost opportunity to see us as adversaries.

We are dedicated Europeanists. We care about our
people deeply but we are not populists promising all things to all people.
Moreover, we can carry the Greek people along an agreement that is genuinely
beneficial to the average European. In us you will find trustworthy partners
who do not see these meetings as a means of extracting something out of
nothing, of gaining at anyone’s expense.

I look forward to discuss with you now, in a true
spirit of cooperation and partnership, and to write together this new page of
our relationship.

I thank you very much for your attention.

EUROGROUP
MEETING – FEBRUARY 11, 2015 – BRUSSELS

NON-PAPER FROM THE GREEK GOVERNMENT

On January 25th, Greek citizens sent an unequivocal
signal of change and endorsement of the new social contract for political
stability and economic security proposed by SYRIZA.

The new government is committed to implement policies
that will deeply reform Greece’s social economy, reduce rent-seeking, anchor
euro membership and reflect the will of the Greek people. These policies will
address the humanitarian crisis, enhance social cohesion, restore justice and
dignity, put the Greek population back on its feet and restore economic growth.

The government knows that improving citizens’ daily
lives requires macroeconomic, fiscal and financial stability. As such, the
Greek authorities intend to maintain sound public finances and to preserve
financial sector stability. They stand ready to commit to realistic and
reasonable quantitative targets in that regard. 

There is a way to foster policies that will restore growth
and maintain fiscal stability,  while
addressing the most pressing needs of the people. These policies should be part
of a new  agreement between Greece and
its Eurogroup partners that focus on economic development, investment, social
conditions and improved public management.

Greece has made an extraordinary adjustment over the
course of the past five years. Its deficit is now below 3% of GDP, down from
15% in 2010. Its primary surplus has reached 1.5%, its structural balance,
adjusting for the output gap as measured by the IMF, has reached a surplus of
1.6%, one of the highest in Europe.

The new government takes this adjustment as its
starting point. The task now is to stabilize the Greek economy and society,
which has paid an immense and unsustainable price, and this requires changes to
the previous policies. However, agreeing on a new policy framework between
Greece and its  partners will take time.
The government proposes to its Eurogroup partners to agree immediately on a
bridge and stabilization program for  the
next seven  months (e.g. up to
end-August), with a 90 day-period for negotiations on the terms at the
beginning. These will provide the appropriate time-frames to agree on and to
begin to implement policies that will repair society, restore confidence, and
support growth and development in Greece.

Greek Government Policy Objectives & Commitments

The government is ready to commit to the following:

1. Sound and Sustainable Public Finances

The government 
commits to maintain a 1.5% primary fiscal surplus in 2015, when the
domestic situation has stabilized, and to maintain that objective until such
time as normal conditions are restored and the debt ratio is on a clear
downward path.

To meet this objective, the government will refrain from
spending measures that might derail the budget target and it will increase
efforts to improve  tax collection.
Increases in spending will focus on investments financed by the European
Investment Bank and other outside sources, and on measures addressing the
humanitarian crisis including a food stamps program, minimum electricity and
heating and basic transport. Insofar as these must rely on domestic resources
they will be balanced by additional revenues or offsetting spending reductions,
as required to maintain the fiscal objectives.

Unrealistic fiscal targets are self defeating and must
be revised. The primary surplus target of 4.5% of GDP over the medium term and
4% over the long-term was entirely artificial, has no historical precedent
resembling Greece’s circumstances, and has essentially no support from among
reputable economists. In practice pursuit of such a target is also
unsustainable, and the goal of putting debt-to-GDP on a clear downward path
requires that it be revised.

Uncertainties surrounding the electoral period in
Greece and the ultimate status of Greece with respect to Europe have affected
economic activity and fiscal performance over the last two months.  As a first step, it is essential to stabilize
the banking system immediately and to restore confidence in Greece as a full
and permanent member of the Eurozone. The Government of Greece requests
immediate affirmation and assistance from its Eurogroup partners to this end.

2. Maintaining Financial Sector Stability

The stability of the Greek financial sector is of
utmost importance to the government and an immediate concern  for the Euro Area as a whole.

Following the ECB Governing Council’s decision on Feb.
4th, Greek banks will remain fully secured as they rely on Bank of Greece’s
Emergency Liquidity Assistance (ELA).

The government expects that an agreement with its
Eurogroup partners on a bridge program will allow the Governing Council to
renew the waiver for eligibility of Greek paper to Eurosystem refinancing
operations.

In the medium term, additional action is required to
support further the banking sector. The government would like to discuss with
its partners the mobilization of remaining unspent resources available to the
Hellenic Financial Stability Fund (app. EUR 8 billion) to further
strengthen the banking system. The
government stands ready to make a concrete proposal on how the remaining HFSF
assets could be used to clean out the banks from their NPLs. Moreover, HFSF
management should be made more transparent and efficient.

3. Addressing Immediate Financing Needs

Covering gross financing needs in an immediate concern
for the Greek authorities.

Before June, Greece faces €5.2bn repayments to the
IMF. The government is fully committed to honor these payments. The government
looks forward to a positive discussion with the IMF on renewing a financing
agreement based on an updated  DSA.

To meet its immediate payment obligations, the
government asks the Eurogroup to disburse to Greece the outstanding €1.9bn SMP
bonds related Eurosystem income, in accordance with Eurogroup previous
commitments. After June, €6.7bn repayments are scheduled over the summer to the
ECB as the holder of SMP bonds. This repayment creates very exceptional
pressure on Greece’s funding needs in 2015. 

The government expects that an agreement regarding the
issuance of T-bills will be obtained to cover these exceptional needs. This
would not raise the amount of debt, but only change its composition.

4. Debt Sustainability

Restoring debt sustainability is a key policy
objective for the Greek authorities.

Additional measures will be required to restore
Greece’s long-term solvency and to ensure its capacity to borrow in the
financial markets at reasonable cost in the near future. Eurogroup committed in

November 2012 to tackle this issue once Greece would
post primary surpluses, which was the case in 2014 and will be the case in
2015.

IMF technical staff should work closely with the Greek
team to assist in developing a sustainable debt program, taking full account of
the experience of the recent past. 
Buttressed with quantifiable targets audited by unconflicted parties,
such an arrangement could form the type of covenant that the government  and the EU partners and bilateral lenders can
accept.

In that framework, the authorities are ready to open
discussion on options that would bring Greece the necessary breathing space and
ultimately the means to restore access to financial markets. These options
would be part of the “new deal” to be sealed between Greece and its partners.
They would be fully consistent with (i) the new more realistic fiscal framework
to be agreed;  (ii) an updated IMF Debt
Sustainability Analysis taking stock of these new assumptions, and (iii) a
positive program for growth and social development to which the government and
the Greek people are firmly committed.

Greece is ready to make concrete proposals to its
partners, in due time, on a menu of instruments to reduce the debt burden
efficiently, including debt swaps.

5. The  New
Reform Agenda

The Greek Government is working on a new agenda for
growth and structural reforms. The new agenda will address the causes of Greek
economic decline and help to modernize the Greek socioeconomic model.

The government undertakes to reduce  tax evasion, tax immunity, smuggling,
cartelsand rent-seeking. Reforms will improve the enforcement of income tax,
VAT, and social contributions, and fight tax evasion with an emphasis on
transfer pricing in large corporates active abroad. The government stands ready
to discuss legislative proposals to reinforce the legal framework for an
independent tax authority within the Ministry of Finance.

A full legislative package will  improve the 
business climate and undermine rent-seekers, in particular in the oil
sector, the financial sector, and the media. Public procurement procedures will
be made more transparent and fair thanks to a more centralized system,
efficient monitoring and e-procurement. Reforms will increase the overall
efficiency of the public sector, with an objective to improve the quality of
services delivered to every citizen. Policies undermining social cohesion have
failed and will be dropped.

Foreign investors remain welcome and the government
will support their investments in Greece. 
On privatization and the development of public assets, the government is
ready and willing to evaluate each and every project on its merits alone.

To boost domestic investment and support economic
recovery, the government will create a national development bank, to which
various public assets will be transferred, and to support the SMEs. The
national development bank will play a leading role in channeling EIB loans
allocated to private projects in Greece.  

The Greek authorities have asked the Secretary General
of the OECD, who has accepted, for technical assistance in devising,
implementing and monitoring this new reform agenda.

7. A New Contract for the New Agenda

This new agenda will give impetus to many of the
policy actions listed in the policy program previously agreed between Greece
and its Eurogroup partners, including tax policy, revenue administration,
public financial management, public administration effectiveness, collection of
social contributions, promotion of business investment, spatial management and
planning, and reform of the judicial system.

Over the bridge period during which this new contract
will be prepared and negotiated, the government will put a priority on the
implementation of those actions listed in the existing agreements that are
fully consistent with its political mandate. Altogether, they would represent
more than 70% of the whole list of previously-agreed actions. New initiatives
announced by the government will be programmed to take effect after the
completion of successful negotiations.

8. Conclusion

Europe is whole and indivisible, and the government of
Greece considers that Greece is a permanent and inseparable member of the
European Union and the Eurogroup. The government is committed to a relationship
between Greece and its partners based on good faith, mutual trust, and a common
commitment to the European project. It is confident that a relationship firmly
built on this basis can work to restore the Greek economy and to anchor
Greece’s future as a prosperous member of the Euro Area.

           

16/2/2015
– YANIS VAROUFAKIS TALK IN THE 16TH FEBRUARY 2015 EUROGROUP MEETING

Mr President,

Dear colleagues,

This government’s
task is to carry out the deep reforms that Greece needs to arrest the combined
forces of deflation and negative debt dynamics, bring about investment-led
recovery and, thus, maximise the net present value of our debt repayments to our
creditors.

The Greek government
fully respects its commitments to our partners and to the institutions that we
are party to. Our difficulty in declaring a commitment to the current program,
and to its “successful conclusion”, is that in our estimation this program was
not conducive to recovery and, thus, inherently impossible to conclude
successfully.

To many, our
reluctance to accept the phrase “extend the current program and successfully
complete it” stems from the determination of this government never to issue a
promise that it cannot keep. We fear that if we accept the priorities, the
matrix, of the current program, and only work within its overarching logic, even
if we change some aspects of it, I fear that we shall be giving the debt-deflationary
spiral another boost, we shall lose our people’s support, and, as a result, the
country will be very hard to reform henceforth. As a recently appointed finance
minister of a country that has a credibility deficit in this room, I trust that
you will understand my reluctance to promise that which I do not believe I can
deliver.

Nevertheless, there
is much that we can deliver that is of mutual benefit. To do so, we need a short-term
(three to six month long) agreement that will allow us to establish the “common
ground” mentioned by President JD and Prime Minister AT last Thursday. It is in
no one’s interest if, over the next days and weeks, as a result of a political
failure on our part Greece languishes under a collapse in activity, a collapse
in revenue and continued deposit outflows.

We need an in-principle
agreement that during this period the Greek state will be funded under a minimalist
menu that solves the short term cash flow problem (e.g. transfer to the IMF, in
lieu of Greece’s repayments, of the €1.9 billion that the Greek government is
due from the ECB ‘profit’-rebate agreement; a flexible ELA, a rise in the
artificial cap of T-bill issues etc.) and commits the Greek government to a
number of conditionalities:

The Greek government is deeply concerned about the deleterious effects
of non-performing loans on the capacity of Greece’s private banks to extend
credit to firms and households and is, thus, keen to find means, utilising the
unused capacity of the HFSF to cleanse them. Similarly, we are eager to find
ways of writing off the accumulated penalties on taxpayers in arrears that have
mounted up to €70 billion. Naturally, the Greek administration understands that
any such write offs must be designed to avoid rewarding strategic defaulters
and, most certainly, to prevent a long term tendency to delay paying debts and
taxes. Still, we think that the backlog of arrears and NPLs are a major
impediment to recovery. To this end, we shall seek the advice of our partners
before legislating appropriately.

In exchange of the
above commitment that the Greek government is prepared to give during the
period of the extension/bridge, our partners ought to agree that, during the
same period:

Regarding the
specifics of the short term financing, or of the above conditionalities, we
believe that these technical issues can be resolved within a day or two, as
long as the political will is present. In any case, let me remind you that we
are talking about a short space of a few months of stability that is necessary
to establish the parameters of the longer term framework within which Greece
and Europe and the IMF will establish so as to put Greece on a sustainable
path.

The Greek authorities
are determined to use these few months effectively, as opposed simply to buying
time for the purpose of doing little. We propose to concentrate on a few
reforms that are essential and which can be implemented immediately, with the
assistance of the institutions plus of the Organization of Economic Cooperation
and Development. Among them, we intend to:

Ladies and gentlemen,
dear colleagues,

Unlike previous
governments we shall not make promises which we know we cannot fulfil. I could,
for instance, placate everyone by accepting for example the €5 billion
privatisation target, so as to reach agreement. But I know that I cannot
deliver. Just like previous governments could not deliver in a marketplace of
collapsing asset prices.

Similarly with
foreclosures of non-performing mortgages. Independently of our ideological
differences (and whether you agree with our government that family homes should
not be auctioned off in the midst of a depression on ethical grounds), the fact
remains that it would be non-sensical to throw hundreds of thousands of
families on the street at a time when there are no buyers and, as a result,
such foreclosures will yield no capital for the banks, will fuel the already
hideous humanitarian crisis and, in the end, destroy what is left of the real
estate market.

To recap, our
government is ready and willing to apply for an extension of our loan agreement
till the end of August (or any other duration that Eurogroup may deem fit), to
agree on a number of sensible conditionalities for the duration of this period
and to commit to having a full review complete by the European Commission at
the end of this interim period – a period that will allow Greece and its
partners to design together a new Contract for Greece’s Prosperity and Growth.

I trust that, despite
any differences, our common ground is solid and such that we can build upon it
a mutually beneficial agreement in the spirit of true European collegiality.

EUROGROUP
MEETING – FEBRUARY 16, 2015 – BRUSSELS

NON-PAPER FROM THE GREEK GOVERNMENT

Technical discussion took place on Feb. 13-14 between
Greek officials and representatives from the EU Commission, the ECB and the IMF
to identify common ground between the two parties and discuss the content of
the current MoU.

On structural reforms, good progress was made to
identify areas where the Greek authorities can support the ongoing reform
agenda: tax reform, revenue administration reform, public financial management,
fighting corruption, e-government, public procurement reform, business climate
improvement, judicial system reform, implementation of EU legislation on
network industries and competitive sectors.

Time is needed over the coming weeks for the new
government to make a more detailed assessment of ongoing reforms. The Greek
government is fully committed to continue efforts made in these areas. It
considers as an essential part of its political mandate to accelerate
implementation of decisive policy actions the previous government failed to
implement: decisively confronting tax evaders, fighting corruption and
reforming public administration. It stands ready to commit to the short-term
implementation of key policy actions.   

Technical discussions revealed real differences of
logic on a limited number of issues. The Greek government considers current
labor market reform agenda as unfit to the current situation of the economy. It
will promote a different approach, with technical assistance from ILO, to
ensure workers’ protection in a way that is consistent with economic growth.

The government will also promote a different approach
for managing public assets. Privatizations will not be stopped but assessed on
a case by case basis to ensure that they are consistent with public interest.
Fire sales must be prevented, and a longer time horizon, in particular with
respect to the banking sector, must be considered.

On public administration reform, the government
supports the goals to make SoEs more efficient and establish a more efficient
civil service but systematic dismissals will end. On taxation, the government
will review current policies to protect the poorest segments of the population.
It will review the brackets for income tax to increase progressivity and
replace the current property tax by a wealth tax. VAT reform will be reviewed.

Finally, the Greek authorities identified some areas
where there is a general agreement on broad objectives but where they would
like to discuss new ideas to meet the policy goals of the MoU. On banking
sector reform, the authorities would like to discuss the creation of an Asset
Management Company to address NPLs. To support investment, the government
considers a priority to develop the social sector and create a public
development bank.

On this basis, the Greek authorities consider that
there exists sufficient common grounds to constructively discuss with its
European partners, on the basis of fresh views and a forward looking approach,
the terms of a new commonly agreed policy agenda that will fully encapsulate
the government’s views. The government is committed to continue a reform agenda
which takes the best elements of the current program and of its own reform
agenda. These discussions should be held in an appropriate format that builds
on the ECB’s and EU Commission’s specific mandates.

The Greek authorities are committed to continued
primary surpluses over the next decade to ensure sound publics finances.
However, implementing the primary surplus targets envisaged by the MoU would be
counterproductive. A 3% primary surplus in 2015 and 4.5% in 2016 would
jeopardize the current fragile recovery. Moreover, it is not at all necessary
to put the debt on a steady declining path. A 4.5% primary surplus would lead,
according to our projections, to extinguish entirely the debt by 2050. This is
not the standard definition of debt sustainability.

The current program sets the objective of a 124%
nominal debt-to-GDP ratio in 2020 to ensure sustainability and full
market-access in 2023 when large maturities will have to be refinanced. The
authorities consider this target as artificial and inappropriate. As stated by
the Director General of the ESM in 2013, the structure of the Greek debt is as
important as the debt-to-GDP ratio to assess sustainability. Long term
maturities and reduced interest rates already entail a lower debt ratio in 2015
in net present value terms. In NPV terms, the debt stands at 135% of GDP and
would fall below the bar of 120% if the same 1,5% primary surplus as in 2014
was achieved. The government looks forward to discuss with the IMF and the
other institutions a more accurate assessment of debt sustainability. 

Privatization receipts can contribute to improve the
debt trajectory. However, past commitments made by the previous Greek
government fell short of the targets. Quantitative objectives should be
realistic. Forcing sales of public assets in a depressed environment is
unjustified. The authorities will stop all sales that are not in the public
interest. 

Funding needs in the year 2015 and over the coming
months is a pressing and immediate concern.

Budget
Balance

On the revenue side,
the previous period was dominated by political interventions, of varying
intensity and from numerous sources that promoted uncertainty and thus affected
economic activity and tax collection. Revenue
shortfall as of end-January reached €2 billion compared to MoF forecast.

The authorities contemplate exceptional action in
terms of revenue mobilization in 2015. Up to €5.5bn are expected over the year
thanks to a strong effort to (i) fight illegal trading, tax evasion and
corruption (ii) better control transfer pricing in companies active abroad
(iii) reform arrears collection process and (iv) implement a more progressive
taxation on the wealthiest.

The authorities will look forward to maintain a 1.5%
primary surplus over the year. This objective depends on economic
stabilization. New spending (humanitarian package) will be financed through
reprioritization of expenditures and cuts in other budgetary items.

Debt
Amortization

    

Greece faces exceptional funding needs in 2015.
Payments to the IMF as well as to the ECB and other creditors will amount to c.
€17bn over the year.

Budget deficit itself, in cash term, will not add much
to this figure, especially if the SMP profits are incorporated in the
government resources.

To cover all its refinancing needs, the government
proposes to open discussions with its European partners on the terms of a new
contract that will provide the appropriate framework for continued support from
the ECB and Member States. Technical work conducted with the three partner
institutions demonstrated that there is room for a new deal. The government is
confident that a fresh look at DSA will demonstrate that the objectives of the
government are on target. Once an agreement is reached on the desired pattern
of fiscal adjustment, the Greek government believes a holistic agreement will
be on reach on structural reforms. 

Short
Term Bridge Funding

To solve short run liquidity problems, the government
foresees an agreement on a combined involvement of the Eurosystem and its ELA
program (in relation to the issuance of T-bills), of the IMF through new
disbursements and of the Eurogroup for allowing the release of the unused HFSF
resources.

We are confident that
such an agreement can be reached on the basis of the sufficient common grounds
identified with the three institutions on the content of the current MoU. 

Annex 1:
Privatization Receipts

The expected cumulative privatization proceeds are
expected to reach €22.3bn by 2020 according to the IMF. However, the Greek
authorities consider this target unrealistic.

Privatization
Receipts have fallen Short of Expectations since 2011

In 2011, under the first program, the MoU agreed with
the Eurogroup expected €50 billion of privatization receipts over the period
2011-2016, with a €5bn target for 2011, €10bn for 2012 and €5bn in 2013 (€20bn
total receipts at the end of 2013 and €35bn at the end of 2014).

In 2012, the second MoU stated that the €50bn target
was maintained, but over a much longer time horizon. The end-2020 target was
revised down to €22bn in April 2014 considering the “unsatisfactory
privatization process”.

In practice, privatization proceeds amounted to €1.6bn
in 2011, zero in 2012, 1bn in 2013 and were expected to reach 1.5bn in 2014 and
2.2bn in 2015.

These figures demonstrate the practical inability of
privatizations to bring sizeable resources to repay public debt in the current
Greek context.

The New
Government’s Intentions

The intentions of the new Government to halt the
systematic approach to privatizations will result in a shortfall over the short
and medium run, but could ultimately produce higher proceeds over the long run
by avoiding fire sales and/or asset disposals that are not in the interest of
the Greek people.

This new attitude will inevitably deteriorate the debt
sustainability over the short run and prevent Greece to reach the arbitrary
target of 124% of nominal debt to GDP ratio by 2020, but it will with no doubt
contribute to improve the debt trajectory over the longer run.

Regarding financing needs, privatization receipts for
the year 2015 were estimated at €2,2bn by the IMF. The distribution of SMP
profits for 2014 (€1,9bn) would allow to make up for most of this shortfall.

Annex 2: Debt Sustainability

We show below the same dynamics under
the assumption of a long term primary surplus of 4% as requested by the EU.
Under these unjustified assumptions, the debt would dramatically decrease and
totally disappear within the next 30 yrs, which is not the definition of
sustainability.

Our
only condition for the other side was that we should not be asked to impose
measures that are recessionary – such as pension cuts or VAT hikes.

Annex 3 (Junker-Moscovici draft here)

Annex 3 (Dijsselbloem
draft
here)

Παράρτημα ΙΙ– Προσχέδιο Dijsselbloem

16 February 2015 [14:45]

Preliminary and confidential

[Draft] 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. Over the last week, the Eurogroup and the
institutions have engaged in an intensive dialogue with the new Greek
authorities.

The
Greek authorities have expressed their strong commitment to a broader and
deeper reform process aimed at durably improving growth and employment,
prospects, [enhancing social fairness] and ensuring stability and resilience of
the financial sector. In particular, the Greek authorities commit to
implementing long overdue reforms to tackle corruption and tax evasion, and
improving the efficiency of the public administration. At the same time, the
Greek authorities reiterated   their
unequivocal commitment to honour their financial obligations towards all their
creditors. The Greek authorities will make the most efficient use of the
continued provision of the technical assistance.

We
discussed the policy priorities of the new government on the basis of work
undertaken by the institutions and the Greek authorities. We welcomed that in a
number of areas the Greek policy priorities can contribute to a strengthening
and better implementation of the current financial assistance programme. The
Greek authorities have indicated that they intend to successfully conclude the
programme, taking into account the new government’s plans. In this context, we
intend to make the best use of the existing built-in flexibility in the current
programme. The Greek authorities gave their firm commitment to refrain from
unilateral action and will work in close agreement with its European and international
partners, especially in the filed of the tax policy, privatization, labour
market reforms, financial sectors, and pensions.

The
Greek authorities committed to ensure appropriate primary fiscal surpluses and
financing in order to guarantee debt sustainability in line with the targets
agreed in the November 2012 Eurogroup statement. Moreover, any new measures
should be funded, and not endanger financial stability.

On
this basis, the Greek authorities expressed their intention to request a six
months technical extension of the current programme as an intermediate step. .
This would bridge the time for the Greek authorities and the Eurogroup to work
on a follow-up arrangement.  We also
agreed that the IMF would continue to play its role in this new arrangement.
The Eurogoup is favourable disposed to such a request by the Greek authorities.

Moreover,
we were informed by the EC, the ECB and the IMF that it would be prudent to
extend the availability period of the EFSF bonds in the HFSF buffer for six months,
in parallel to the extension of the EFSF programme. The Eurogroup looks
favourably at such an extension. Following a request by Greece, the EFSF can
make the necessary arrangements.  The
Eurogroup emphasizes that these funds can be   
used for bank recapitalization and resolution costs and will only be
released on the basis of an assessment by the institutions and a decision of
the Eurogroup.

We
remain committed to provide adequate support to Greece until it has regained
full market access as long as it honours its commitments within the agreed
framework.