The leaders of the countries that use the euro said this evening that they would provide an additional aid package for Greece provided that the government agree further, new measures to reduce the deficit.
Speaking after a meeting of EU leaders in Brussels, Herman Van Rompuy, the president of the European Council, read out a statement saying: “A comprehensive reform package agreed with the Commission, in liaison with the ECB and the IMF, and adoption by the Greek parliament of the key laws on the fiscal strategy and privatisation must be finalised as a matter of urgency in the coming days.”
Van Rompuy said that this would “provide the basis for setting up the main parameters of a new programme jointly supported by its [eurozone] partners and the IMF”.
He added that the additional funding for Greece would be provided from public and private sources. The EU will, he said, continue its efforts to convince the private sector voluntarily to extend the maturity of Greek debt.
Van Rompuy said that there was no conflict between “budgetary consolidation measures” and growth; indeed, reducing Greece’s debt was the only way to return to growth. Citing his own experience as Belgium’s budgets minister, he said: “If you implement the programme [of debt reduction], confidence is gradually restored. It all takes time.”
The Greek parliament is due to vote by the end of next week on a package of measures designed to reduce the budget deficit by €28 billion. Provided it approves the package, it will qualify to receive a €12bn loan from the EU and the IMF.
Greece also needs an additional financing package of around €120bn to meet its funding needs next year.
Meanwhile, in Athens on Thursday, Evangelos Venizelos, Greece’s new finance minister, and inspectors from the EU and the International Monetary Fund reached agreement on further tax rises and spending cuts to bring in another €3.8bn needed because of a revenue shortfall.
European Council conclusions
The European Council welcomes progress made in Ireland in the implementation of its reform programme, which is well on track. It also welcomes the strong commitment by the newly elected Portuguese government to fully implement its programme of reforms. Building on a cross-party consensus on the need to reform, strict implementation of those programmes will ensure debt sustainability and will support the return of Ireland and Portugal to the financial markets.
Euro area Heads of State or Government reiterate their commitment to do whatever is necessary to ensure the financial stability of the euro area as a whole.
The recovery in the euro area is well on track and has reached a sustainable path of solid growth. The euro is based on sound fundamentals, and we are deeply satisfied with the track record of price stability achieved since the inception of the euro.
As regards Greece, the European Council recognises the considerable progress achieved over the last year, particularly in the area of fiscal consolidation. It welcomes the Greek government’s continued strong commitment to implement the adjustment programme.
The European Council calls on the national authorities to continue implementing with resolve the necessary adjustment efforts to put the country on a sustainable path. A comprehensive reform package agreed upon with the Commission, in liaison with the ECB, and the IMF, and adoption by the Greek Parliament of the key laws on the fiscal strategy and privatization must be finalized as a matter of urgency in the coming days. Following the request by the Greek government announced by the Greek Prime Minister, this will provide the basis for setting up the main parameters of a new programme jointly supported by its euro area partners and the IMF, in line with current practices, and at the same time for allowing disbursement in time to meet Greece’s financing needs in July.
The euro area Heads of State or Government agree that required additional funding will be financed through both official and private sources. They endorse the approach decided by the Eurogroup on 20 June as regards the pursuit of voluntary private sector involvement in the form of informal and
voluntary roll-overs of existing Greek debt at maturity for a substantial reduction of the required year-by-year funding within the programme while avoiding a selective default.
The euro area Heads of State or Government call on Finance Ministers to complete work on outstanding elements to allow the necessary decisions to be taken by early July.
The European Council calls on all political parties in Greece to support the programme’s main objectives and key policy measures to ensure a rigorous and expeditious implementation. Given the length, magnitude and nature of required reforms in Greece, national unity is a prerequisite for success.
The European Council welcomes the Commission’s intention to enhance the synergies between the loan programme and the EU funds. The European Council supports all efforts to increase Greece’s capacity to absorb EU funds in order to stimulate growth and employment. This can be done by refocusing them on improving competitiveness and employment creation. Moreover, the European Council welcomes and supports the preparation by the Commission, together with the Member States, of a comprehensive programme of technical assistance to Greece.
Heads of State or Government are conscious of the efforts that the adjustment measures entail for the Greek citizens, and are convinced that these sacrifices are indispensable for the economic recovery and will contribute to the future stability and welfare of the country.
EU leaders backed a proposal by José Manuel Barroso, the European Commission president, to accelerate payment of €1bn in structural funds for Greece. Barroso said the purpose of the funds was to spur growth and employment. He added that the Commission could, and was willing to, adjust its standard practice of requiring a recipient to find matching funds. “We are prepared to raise the co-financing rate to 85%,” he said. He also said that Greece had only used a quarter of the €20bn it was allocated during the current budget period.
The EU’s leaders did not formally appoint Mario Draghi, the governor of Italy’s central bank, to be the next president of the European Central Bank (ECB). France wants Lorenzo Bini Smaghi, a member of the ECB’s executive board, to step down so that there are not two Italians on the board. Van Rompuy said that the issue would be decided on Friday, the second day of the summit.
Leaders also discussed a range of measures to improve economic policy co-ordination in the eurozone and the EU. These include recommendations from the European Commission to each member states on economic reforms. Van Rompuy said that leaders had endorsed “uncompromising assessments and strong recommendations” without watering them down. “This is very positive,” he said, as it showed that leaders had learned the lessons of the eurozone crisis about the interdependence of economies.
Barroso said there had been “real commitment to pursue reforms”.
The summit continues on Friday when leaders will discuss migration, asylum and border controls, Croatia’s bid to join the EU and the situation in Libya, Syria and the EU’s southern neighbourhood.