Euro ministers still waiting for Greek reforms

The last Eurogroup of the year on Monday (7 December) gave some good news on Greece, but tension is still in the air when it comes to the next steps of the bailout programme.

This Tuesday the last tranche of money to recapitalise the four main Greek banks should be disbursed.

This will finalise a process to stabilise the country's banking sector, weakened by political instability, capital flight, capital controls and unpaid loans.

"The exercise will cost the programme less than €5.5 billion, well below initial estimates," Eurogroup president Jeroen Dijsselbloem said at a press conference.

The process is "overall a good success with significant involvement from private investors," he added.

The second piece of good news was given by the EU commissioner for economic affairs, Pierre Moscovici.

"The GDP projections for this year and next year as not as bad as what we expected back in August," he said. "We expect stability in 2015 and 0.7 percent decline in 2016."

Previous forecasts were of a decrease of GDP of 2.3 percent in 2015 and 1.3 percent in 2016.

But while the bank recapitalisation process went quicker and smoother than expected, the reforms requested by Greece's creditors - the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund - to disburse the bailout money have come at a slower pace.

The first review of the programme, originally planned for October, will not be concluded before the end of January. And Greece must first adopt a second set of so-called milestones to receive a pending €1 billion tranche.

'Greece's interest'

"We called on the Greek authorities to implement these milestones as soon as possible and as agreed," Dijsselbloem said after the Eurogroup.

The milestones "have to be adopted by the end of this week," Moscovici added.

“I am counting on this being respected as it is clearly in Greece’s interests to make up for the time that has been lost this fall,” he said.

The Eurogroup expects the milestones, which include legislation on household insolvency, to be adopted by Friday (11 December), but the Greek government intends to pass them in parliament on 18 December only.

Beyond the milestones, both sides are already looking at the first review and the issues that will have to be discussed next year.

"The objective is to settle this by mid-December, so that we can focus on some of the major fiscal and structural reforms that are still open and need to be finalised for the first review early next year," Dijsselbloem said.

The first review will include difficult items, such as pension reform, taxation of farmers and the definition of a middle-term fiscal trajectory.

"I expect very robust discussions," a EU official said recently.

'IMF not necessary'

So far, the Greek government has respected its commitment, including a positive vote, last week, on an austerity budget for 2016.

The budget, which includes €5.7 billion in public spending cuts and a €2 billion tax increase, was adopted with a majority of only 3 votes, signalling fragility in prime minister Alexis Tsipras' grip on power.

“I feel quite secure with 153 seats and it’s not my aim or intention to broaden my government,” Tsipras told ERT public television on Monday.

But the prime minister anticipated upcoming discussions and attacked the IMF, accusing it of not being constructive.

“The fund has to decide whether it wants to stay in the programme and, if it doesn’t want to compromise, it should say so publicly,” he said, suggesting he would prefer the IMF to go.

"I have the impression that IMF funding is not necessary," he said.

The IMF is pushing for a restructuring of Greek debt, which Tsipras wants, but also for wider reform of pensions in order to make Greek finances more sustainable. And that will be politically problematic for Tsipras.

Arriving at the end of a rocky year, Tsipras sounded a positive note, however. "A Grexit is no longer on the table,” he said.