The framework agreement on a package of ‘deeper reforms’ in Greece will including tax and pension issues but also labour market reforms that are “in line with best EU practices,” Eurogroup President Jeroen Dijsselbloem said on Monday, during a press conference announcing the results of the Eurozone finance ministers’ meeting in Brussels.
“On a number of topics discussion will be reopened to set up a forward-looking labour market reform, including collective wage bargaining, and on that topic there will also be a discussion of reintroducing the extension principle,” he told reporters in response to questions. While the timing and conditions still needed to be designed and agreed, he added, the key issue on labour market reform was to have an agreement in line best EU practices, as already agreed in 2015.
Asked to comment on the Greek government’s announcement that the package will involve “not even one euro” of additional austerity, Dijsselbloem clarified that this “was not what I said”. At the same time, he added, if the reforms deliver in fiscal terms the Greek government could then “use that fiscal space” to legislate for measures to enhance growth.
“I said we should see this as a shift in emphasis, in the policy mix, from the austerity side much more to structural reforms. Which also means that if the structural reforms deliver in fiscal terms, there could be fiscal space and the Greek government will put forward proposals – also agreed with the Commission and the other institutions – to use that fiscal space and put it back in growth enhancing measures.”
The size of these measures, he explained, would depend on the size of the reforms and “where they are on the fiscal path going forward.”
“If all goes well and if that package of reforms is substantial and the current path, where I think that they are ahead of track, is sustainable then there will be fiscal space to put back in growth enhancing measures. Under those conditions, the Greek government can prepare those measures, legislate those measures if they want,” he added.
Asked if this was the “end of austerity” in Greece, Dijsselbloem emphasised Greece’s progress in terms of the budget and said the emphasis was now on structural reforms to ensure that this stays on track and that fiscal policy supports further economic recovery – hence shift from austerity to structural reforms.
“This is also in line with what the IMF has stressed: really put emphasis on structural reforms, which indeed do also make the budget sustainable.”
Asked whether these reforms represented the pre-legislated measures the IMF has asked for, and whether the IMF could be persuaded to come on board without an agreement on debt relief for Greece, Dijsselbloem said the first step was for the institutions to return to Athens and design a staff-level agreement specifying the reforms.
“There is full agreement between the institutions and the Greek government that a substantial package of reforms is needed, like the IMF has asked. That is understood and committed to,” he said, noting that what was agreed to now “is to the liking of the IMF.”
“The issue of sustainable debt will come back once the package of reforms has been agreed. That’s the first step now. Let’s get these reforms designed and agreed.” Once the package was agreed upon, the IMF would again pose the question of the debt’s sustainability “and they will look at the size and the depth of these reforms,” he noted.
“It is my ambition now to come to a point where the package of reforms, the fiscal trajectory looking foward, the debt sustainability all of these come together and all together are credible enough for the IMF to go to the board,” Dijsselbloem said. Greece’s European partners will return to the issue of medium-term debt measures in the Eurogroup “as agreed in May last year,” he added, but this would have to wait for the outcome of the mission in Athens.