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Thursday, October 27, 2016

E.U. Calls On France, Greece To Stick To Reforms

E.U. Calls On France, Greece To Stick To Reforms

Athens (AFP) – Eurozone officials urged France’s incoming government on Tuesday to stick to reform pledges, and Greece to capitalize on its austerity sacrifices in return for a long-delayed 6.3-billion-euro slice of bailout cash.

The loan disbursal announced at a two-day meeting of European finance ministers, after seven months of tough talks between Greece and its E.U.-IMF creditors, will enable Athens to repay maturing debt in May.

And Greek finance minister Yannis Stournaras later said a planned return to financial markets would happen earlier than originally announced.

As Greece closed one more difficult chapter in its slow recovery, France seemed headed for a fiscal discipline dispute with the E.U.

There were long faces after French President Francois Hollande said implicitly that Paris would seek leniency from the E.U. Commission for overshooting its public deficit target, as he announced a change of government on Monday.

“It is essential that France act decisively, both to ensure the sustainability of its public finances, and to address well known bottlenecks to competitiveness and growth,” reacted E.U. Economic Affairs Commissioner Olli Rehn.

“For the sake of refreshing our memories, the existing deadline on France’s deficit has already been extended twice,” Rehn said.

Hollande wants E.U. authorities to take account of structural reforms in the making in France when analyzing the deficit, which under the bloc’s Stability Pact should come in at three percent of output.

“I will fully agree with the president of France, it is in the interest of Europe to have a strong France,” said Eurogroup chief Jeroen Dijsselbloem.

But “France has to deliver on its commitments under the growth and stability pact.”

The French public deficit, or gap between spending and revenues, amounted to 4.3 percent of national output last year, official data showed on Monday.

This is above the target of 4.1 percent agreed with the EU, and raises the stakes as Hollande oversees the composition of a new government after a local election debacle on Sunday.

France has said it intends to tighten the budget by 50 billion euros ($69.0 billion) over three years, both to meet its EU deficit targets by the end of next year and cut charges on businesses which have eroded the country’s industrial competitiveness.

The Eurogroup had a similar message for Italy, where new Prime Minister Matteo Renzi has announced a 10-billion-euro tax cut for low-income families, a move that could put pressure on budget forecasts.

“We trust that Italy will respect its European commitments and focus on fostering sustainable growth and job creation,” Rehn said.

Athens will receive 6.3 billion euros ($8.7 billion) from its pending E.U. bailout fund at the end of April, Dijsselbloem said.

Two more slices of one billion euros apiece will be disbursed in June and July if Greece makes progress on pledged reforms.

This leaves 1.8 billion euros remaining in Greece’s bailout program as far as the eurozone is concerned, said Klaus Regling, managing director of the European Stability Mechanism.

“The most important thing is to now implement all the structural reforms that have been agreed,” said European Central Bank President Mario Draghi.

“The thing to do is to not unravel the fiscal adjustment, the progress that has been achieved with so much pain and effort,” he said.

Dijsselbloem said that following these decisions, Greece was “fully financed” for the next 12 months.

This is a requirement set by the IMF, which makes its own loan payments conditional on Greece’s one-year funding viability.

The global lender will meet later this month to determine how much of its own pending payments — about 3.6 billion euros — to release to Greece.

Athens has so far received a combined 240-billion euro bailout.

Dijsselbloem refused to comment on whether Greece might yet need another loan.

Greece had said previously it intends to return to borrowing on financial markets in the second half of the year with a sale of five-year bonds to raise 1.5 to two billion euros.

Stournaras on Tuesday said “a small issuance of bonds, three to five year bonds” would take place in the first half of the year.

Greek unions have called for street protests in the capital in the evening against austerity.

AFP/Louisa Gouliamaki

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