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European Union; Greece: New Agreement on Financial Assistance

(Feb. 26, 2015) On February 20, 2015, the Eurozone members and the newly elected leftist Government of Greece, after tense negotiations, reached a new accord to extend the existing bailout agreement, formally known as the Master Financial Assistance Facility Agreement (MFAFA), for an additional four months. The extension had been requested by the Greek government on February 19. The discussions took place in view of the upcoming expiration of the current bailout program on February 28, 2015. (Eurogroup Statement on Greece, European Council & Council of the European Union website (Feb. 20, 2015).) Nineteen European Union members, including Greece, are currently also part of the Eurozone. (Euro Area 1999-2014, European Central Bank website (last visited Feb. 25, 2015).)

Greece’s Proposals

On February 24, 2015, the Greek government presented an initial list of reforms designed to meet its commitments to Eurozone members. Tax evasion and corruption are two key issues at the top of the list of Greece’s proposals. Measures to combat them have been long overdue, and they have had significant adverse effects on the Greek economy. (The Entire List of Proposals, E KATHIMERINI [THE DAILY] (Feb. 24, 2015) (in Greek).) More specifically, the Greek government proposed the following changes:

Taxation

  • Broadening the definition of tax evasion and fraud to make it more difficult for individuals to avoid paying taxes, and eliminating tax amnesties;
  • Improving the collection of Value-Added Tax (VAT) through the use of technology;
  • Modernizing the tax code by eliminating exemptions and enacting new tax measures to improve social justice; and
  • Not imposing criminal liability for small amounts of taxes owed, and distinguishing between those who owe taxes but systematically refuse to pay and those who are unable to pay their taxes. (Id.)

Public Administration and Corruption

  • Combating corruption as a national priority;
  • Combating smuggling in cigarettes and fuel and fighting money laundering;
  • Improving legislation on funding of political parties and placing limits on parties’ borrowing from financial and other institutions;
  • Enforcing legislation on media outlets to ensure that they pay for the broadcast frequencies they use; and
  • Implementing legislation on revenues from mass media (Id.)

Public Spending

  • Reviewing expenditures in the areas of education, defense, transportation, and social services and the reduction of social benefits; and
  • Reviewing expenditures in every ministry and in local and central government, including bonuses to employees. (Id.)

Pensions and Health Insurance

  • Abolishing incentives for early retirement between the ages of 50-65;
  • Reducing spending by health insurance funds, while providing universal health care; and
  • Ensuring a close link between health insurance premiums and insurance benefits. (Id.)

Privatizations

  • Reviewing privatizations that are still in process (privatizations already in place will remain intact); and
  • Reviewing terms of privatization deals so that the state will reap the maximum benefit. (Id.)

Labor Issues

  • Implementing best practices of the European Union in employment in consultation with social partners (that is, organizations representing the interests of workers), the International Labor Organization, and the Organisation for Economic Co-Operation and Development (OECD);
  • Extending existing programs that give jobs to the unemployed, provided that the status of the general economy allows it; and
  • Gradually increasing the minimum wage in combination with increased productivity and employment opportunities. (Id.)

Competition and Industry

  • Removing barriers to competition, pursuant to the discussions with the OECD;
  • Improving the functioning of the Greek Committee on Competition;
  • Reducing bureaucracy in cooperation with the OECD and implementing legislation under which individuals and corporations will no longer be required to furnish documents that are in the possession of other public services; and
  • Improving and completing the National Land Registry. (Id.)

National Statistical Service

  • Respecting the independence of the National Statistical Service (NSS) and ensuring that it has all the necessary tools to perform its duties; and
  • Guaranteeing the transparency of NSS functions and of the appointment procedure of the NSS president that will occur in September 2015 in cooperation with EUROSTAT, the EU’s statistics agency. (Id.)

Humanitarian Crisis

  • Providing assistance to persons below the poverty level through the distribution of food stamps;
  • Using “citizen’s smart cards” by those who use the universal health care system and free meal distribution centers; and
  • Guaranteeing a national minimum wage. (Id.)

Judicial System Reform

  • Modernizing the organization of the courts through specialization and adoption of a new Code on Civil Procedure; and
  • Promoting digitization of legal codes and the electronic submission of documents to the courts, to achieve a more efficient judicial system. (Id.)

Review by Concerned Institutions

These reforms will be reviewed by the institutions involved in the Greek bailout, that is, the European Central Bank, the European Commission, and the International Monetary Fund, previously called the “Troika,” a term no longer used due to objections raised by Greek officials. (George Georgiopoulos, Greece Readies Reform Promises After Eurogroup Climbdown, E KATHIMERINI (Feb. 23, 2015).)

The institutions will review the list of reforms in a two-step process. Initially, they will examine whether the list of reforms is sufficiently comprehensive to be used as solid ground for negotiations. In the second phase, Greece is expected to be more specific and provide more details on its planned reforms, which will be subject to a final review in April 2015. (Eurogroup Statement, supra.)

Only upon a successful outcome of the final review will Greece receive the pending tranche of €10.9 billion (about US$12.4 billion) of bonds from the current European Financial Stability Facility (EFSF) program. The EFSF program, which was first established in 2010 to respond to Eurozone members in dire financial straits, has provided financial assistance to countries in financial distress, such as Greece, Portugal, and Ireland. Under this program, Greece has thus far received €141.8 million (about US$160.7 million) in financial assistance. (Press Release, EFSF, Extension of the EFSF Program and EFSF Bonds for Greece (Dec. 19, 2014).)

The EFSF was replaced by a permanent mechanism, the European Stability Mechanism, which was set in operation in 2012 and provides loans to Eurozone members. Countries that have received financial assistance under the new mechanism include Cyprus and Spain. (About EFSF, EFSF website (last visited Feb. 24, 2014).)