The Eurogroup discussed the implementation of the reform commitments by Greece based on the enhanced surveillance report of 27 February and the update published on 3 April.
We welcome the adoption of a budget for 2019 which is projected to ensure the achievement of the primary surplus target of 3,5% of GDP, and the completion of important structural reforms including key privatisation transactions.
The Greek authorities have legislated a new scheme for the protection of primary residences, which has the potential to support banks in resolving mortgage NPLs. We take note of the commitment of Greek authorities to ensure that the scheme is temporary and will be terminated by end 2019. We ask the institutions to monitor – in the context of enhanced surveillance – carefully the impact of the scheme on the banks’ capital and lending, the impact on enforcement and litigation, its impact on the process of NPL reduction, the impact on efforts to reduce the backlog of pending household insolvency cases and the fiscal implications of the scheme. We welcome the commitment of the Greek authorities to harmonize and improve in the coming months in a holistic fashion the bankruptcy and insolvency regimes.
Furthermore, we take note of the medium-term risks and challenges identified in the enhanced surveillance report. Against this background, we welcome that the Greek authorities reiterated their general commitment to continue the implementation of all key reforms adopted under the ESM programme, especially as regards the income tax reform broadening the tax base and other tax reforms to ensure growth friendly measures and targeted social programmes, the reduction of arrears to zero, the collection of taxes and social security contributions, recruitments in the public sector, privatisations, as well as labour market reforms. It will also be crucial to continue with the implementation of financial sector reforms, to ensure, inter alia, an effective framework for e-auctions, the implementation of the action plan on household insolvency with the objective to eliminate the backlog of cases by end-2021 and improvements in the management of loan guarantees. These will continue to be monitored in the context of enhanced surveillance. The Greek authorities are invited to closely monitor wage developments during 2019 and to analyze the effects of the recent increase of the minimum wage and changes in collective bargaining on employment and competitiveness.
Against this background, the Eurogroup welcomes the assessment by the European institutions that Greece has taken the necessary actions to achieve all specific reform commitments for end-2018 and that the necessary conditions are in place to confirm the release of the first tranche of policy-contingent debt measures. Subject to the completion of national procedures, the EWG and the EFSF Board of Directors are expected to approve the transfer of SMP-ANFA income equivalent amounts and the reduction to zero of the step-up interest margin on certain EFSF loans worth EUR 970 mln in total.
We continue to monitor closely the ongoing legal proceedings against the members of the Committee of Experts (CoEx) of TAIPED and the former President and senior staff of ELSTAT.
Our next discussion on Greece will be based on the next enhanced surveillance report expected to be issued in June.