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Program Review concluded, ESM approves €7.5bn, Supplemental MoU with more measures

Greece passed the test “Program Review” with success, after the government completed all prior actions. Therefore the board of directors of the European Stability Mechanism (ESM) approved the disbursement of €10.3 billion. It is the second tranche of the third bailout. The first disbursement of  €7.5 billion, is expected to be released next week, while the second disbursement of €.2.8 billion will be available  to Greece” upon completion of a set of milestones and satisfactory clearance of domestic arrears by Greece”, so the ESM statement.

Greece will use the €7.5 billion to meet debt servicing obligations and to help clear domestic arrears.

ESM Managing Director Klaus Regling hailed Greece’s performance and obedience and said:

“Today’s decision to disburse €7.5 billion to Greece is a recognition of the Greek government’s commitment to carry out essential reforms. It has passed legislation that will: reform the pension and income tax systems; establish a new privatization and investment fund; enable the sale of non-performing loans; and introduce an automatic fiscal adjustment mechanism to be triggered in case fiscal targets are not met. Thanks to these measures and other reforms implemented in recent months, Greece is on track to return to economic growth.”

But before Greece returns to “economic growth” as the lenders define it, Greeks will suffer further cuts in incomes, pensions, social benefits as wells as a series of tight austerity measures in the already troubled health sector. Finance Minister Euclid Tsakalotos signed in Brussels yesterday a so-called Supplemental Memorandum of Understanding, that summarizes and clarifies in 41 pages Greece’s present and future obligations and tight mechanisms to control spending or avoid tax evasion.

The SMoU contains three measures blocks:

  1. the measures adopted in May/June like V.A.T. increase, special fees and indirect taxes in fuel, heating oil, cigarettes, coffee. internet, vehicles taxation etc
  2. measures that were supposed to have been adopted but have been postponed for September. Among them, privatization of 5% of Telecommunications OTE, changes for industrial use of electricity, freezing 3-year promotion for special payrolls and others
  3. upcoming measures like Labor “reform”, OECD tool kit for pharmacies and drugs, justice, changes in banks management, recapitalization of non-systemic banks.
  4. an automatic spending mechanism of 3.6 billion per year if targets are not met.

The SMoU is teemed up with euphemisms like a “holistic pensions reform” or “adopt a milestone” phrases. Apparently the witch doctors of lenders still believe that that the strict austerity is a healing medicine which might be bitter but it would save Greece – while it will certainly kill Greeks.

The ESM statement notes

“With the disbursement approved today, ESM financial assistance for Greece will reach €28.9 billion, out of a total programme volume of up to €86 billion. The ESM and the EFSF together have so far disbursed €170.7 billion to Greece (including the amount approved today), making the rescue funds by far the largest creditor to Greece.”

Where did and where will this money go? Up to 90% back to lenders.

Supplemental MoU

PS it is the second tranche of the third bailout to be given in first and second disbursement 🙂

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