18 June – Eurogroup in Luxembourg

The European Commission, for the first time, presented to the Greek government (in a PowerPoint presentation that was never printed) its proposals for a new MoU based on the old one. Yanis Varoufakis decided to counter with an alternative reform and fiscal consolidation plan. Forbidden as he was from tabling it in printed form, he spoke to it.

Jeroen Dijsselbloem (00:00:04):

[inaudible] any other contributions. [inaudible] on the issue raised, uh, on the, the effects of the… Could also come back to it on the next agenda item, when we specifically look at the low interest rate, uh, climate, uh, the issue of the effects on insurance companies. Maybe we’ll come back to that, the next agenda item, when we look at it more specifically. Um, uh, any other reactions?

Jeroen Dijsselbloem (00:00:37):

If not, I think that there is, uh, on, er, the- the main analysis, uh, and for both what- what we should do in the Eurozone, uh, and to a large extent [inaudible] institutions. That, uh, makes [inaudible 00:00:53], uh, quite clear to us, should make it quite clear to us what to do, what to do, what the issues to deal with,

Jeroen Dijsselbloem (00:00:58):

[inaudible] were mentioned also by, uh, Christine in her presentation. And, uh, making use of the, uh, current [inaudible] circumstances, to deal with, uh, [inaudible] events, push the structural reform agenda, uh, a- and so forth.

Jeroen Dijsselbloem (00:01:15):

Uh, and many of these issues will also come back [inaudible] refer to, you know, all of our agenda items do refer to it. So [inaudible] expectations are a little higher.

Jeroen Dijsselbloem (00:01:27):

Um, thank you very much Christine. Thanks to the IMF, uh, for the work done. Um, [inaudible] part of our agenda’s over the coming months, as we look at structural reforms, and other issues, other challenges of course.

Jeroen Dijsselbloem (00:01:54):

Um, the, uh, next item on our agenda is the lower interest rate environment. It’s already been touched upon in a number of contributions. Uh, the previous item, uh-

Speaker 2 (00:02:01):

[crosstalk 00:02:01].

Jeroen Dijsselbloem (00:02:02):

It’s part of our thematic, uh [inaudible] thinking about using the windfalls from the current low interest rate environment. But there are also some downsides. We mentioned the insurance companies, but also pension funds. [inaudible] um, the Commission has been so helpful as to produce a helpful background to our discussion. It has already been discussed in the committees. Uh, and I would like Pierre to, uh, present, uh, the Commission’s paper on this issue.

Pierre Moscovici (00:02:35):

Thank you, Jeroen, for having put this, um, whole issue, um, the agenda of today’s meeting. Uh, when we met last month, and discussed [inaudible] the monetary policy measures provided [inaudible].Um, but also we are also agree that these delegates saw that [inaudible] would not last forever and therefore it should be used to make, uh, progress, uh, both in terms of [inaudible] reforms, and- and fiscal consolidation.

Pierre Moscovici (00:03:12):

At the same time, we must recognize also that exceptionally low level of interest rates has been a- a reflection of the very low level of nominal growth experienced in the past two years. Now, [inaudible] today we first took a look at the extent in which [inaudible] bonds, uh, yields, uh, provide any helpful benefit, to member states [inaudible] on the finances. Uh, we worked on, um, how these mutual benefits were used. Uh, and I will briefly [inaudible] conclusion [inaudible] going forward.

Pierre Moscovici (00:03:55):

Uh, first, our findings, uh, suggest that the fall in interest rate expenditure, uh, recorded since 2012 was to a large extent, unanticipated by member states. The euro area [inaudible] bond yields have fallen sharply since end of 2013, including within the core area member states, and reached a historical low. Uh, [inaudible] substantial decrease in interest payments by euro area member states, that for the euro area as a whole, uh, interest expenditure fell from 3% of GDP in, um, 2012, to 2.6% in 2014. And is expected to decrease further this year, 2.4% of GDP according to the commission’s [inaudible] 2015 forecast.

Pierre Moscovici (00:04:36):

Much of this decrease in interest payments has come as a surprise to member states. And the chance to compare interest rate [inaudible] 2015 [inaudible] expected, uh, by member states, in their respective 2013 committee program, latest projection contained [inaudible] in the aggregated level, um, to, uh, [inaudible] program projected, uh, the interest expenditure to remain broadly stable until 2015, 3.1% of GDP [inaudible 00:05:30], against the actual drop for the euro area as a whole, we estimated windfall gain of 0.7% of GDP in 2015 alone [inaudible].

Pierre Moscovici (00:05:37):

Uh, second, uh, member states, uh, uh, not only [inaudible] anticipate movement, they have made little, or no use of the windfall savings from lower interest rates for the fiscal reduction. Our analysis show that actual expenditure, uh, reductions are as a share of GDP, turned out smaller than initially [inaudible]. In other words, everything else being equal, uh, thanks to the lower cost of debt, uh, deficit could have been lower today in member states if those had cut their expenditures as [inaudible 00:06:23]. So it was used- used in reduction of, uh, public expenditures.

Pierre Moscovici (00:06:30):

[inaudible] uh, weaker than expected infl- inflation may also explain some of the lower than planned, um, savings. Further, this is very important to stress that [inaudible 00:06:43].

Pierre Moscovici (00:06:41):


Pierre Moscovici (00:08:09):

[inaudible] read previous page, that we had [inaudible] these are the conclu- the conclusions [inaudible 00:08:16].

Jeroen Dijsselbloem (00:08:25):

Thank you. Um, Mario, would you react to this?

Mario Draghi (00:08:28):

Not, uh, not much to add to what we have said. And just two- two, uh, remarks. The first is that, uh, as he said, uh, [inaudible] problems, we seem to assume that this low interest rate will stay low forever. Uh, they have not built a safety margin, and, uh, they are not [inaudible] the low interest rates.

Mario Draghi (00:09:02):

And, uh, no it’s very unlikely they would stay the way… It already started by the way moving up over, uh, recent time. Uh, one has to understand that with very low interest rates, the potential for uncertainty, and very high volatility is higher than at high interest rates.

Mario Draghi (00:09:13):

Because when- when the interest rates are very low, and around zero, even [inaudible] a very small blip in the short term interest rates is bound to cause a magnified blip [inaudible] interest rates all along the curve.

Mario Draghi (00:09:29):

And so anything that might affect expectations of higher interest rates in the short term, would have an effect quite magnified over longer term interest rates, so…

Mario Draghi (00:09:40):

And the same thing holds for inflation expectations of course. They would, would reverberate on interest rates. So that’s why it certainly should be properly taken into account in the stability programs, by- by the various governments. Thank you.

Jeroen Dijsselbloem (00:09:55):

Thank you. [inaudible 00:10:00]. Thomas [inaudible] discussion.

Thomas Wieser (00:10:08):

Thanks very much. Um, I think we’ve already very, very, a complete, uh, description, and uh, uh, [inaudible] graphs of the nature of- of- of the issue.

Thomas Wieser (00:10:22):

Uh, we had a very, very good, uh, discussion of this. And I think, uh, [inaudible 00:10:26], uh, quite openness to discuss that, uh, further. Um, it was I think here emphasized, uh, by many of the colleagues, uh, that what we were looking at in terms of pure interest rate reductions does not reflect the net savings, budget. Because, uh, very often, uh, especially in this low inflation environment, you will also have, uh, cyclically, uh, lower revenues.

Thomas Wieser (00:10:55):

[inaudible] make it clear, uh, that by the large [inaudible] a measurable, let’s say. Secondly, uh, I think Pierre [inaudible] about, uh, the difficulty of ex- exactly quantifying [inaudible 00:11:10], uh, [inaudible 00:11:11], uh, on the debt structure, maturity structure. Uh, and also, uh, the structure of course of government assets.

Thomas Wieser (00:11:22):

But, um, if one turns to the use, uh, of such [inaudible] policy responses, I would say it became, uh, fairly clear, uh, that there’s support for the idea that the higher, uh, government deficits, and government, uh, debt levels are, the more such windfall profits should be used for fiscal consolidation.

Thomas Wieser (00:11:49):

And the lower, uh, they are, the more likely it is that they should be used, uh, for the, uh, government, uh, investment projects. Uh, clear emphasis [inaudible] the government, uh, [inaudible] expenditure. And also quite a number of colleagues have not fallen into the trap of- of having investment projects for the sake of having investment projects, uh, if they’ve, uh they expect rate of, uh, return [inaudible 00:12:19].

Thomas Wieser (00:12:24):

And, uh, if one, uh, looks over one’s shoulder, uh, what have we experienced so far? Uh, there are two ways of looking at identical, uh, [inaudible 00:12:33]. One could say that so far, by and large windfalls appear to be largely not, uh, used, uh, for, uh, budgetary consolidation.

Thomas Wieser (00:12:37):

You could also say that, uh, by and large, uh, windfalls, uh, have been, uh, been used in an anti-cyclical, uh, manner. Thereby pushing the effect, uh, of, er, [inaudible 00:12:50], uh, of the downturn, the cycle.

Thomas Wieser (00:12:50):

So, uh, we, uh, were not, I think, uh, [inaudible 00:12:50], uh, [inaudible] policy prescriptions. Uh, but it appears [inaudible 00:13:04], uh, will, uh [inaudible] pursuing it.

Speaker 2 (00:13:21):

[inaudible 00:13:21].

Jeroen Dijsselbloem (00:13:28):

Thank you much. Um, I’m glad to, um, uh, [inaudible] reflect from there, the position of their countries. Um, and of course [inaudible 00:13:32]. Yeah.

Speaker 3 (00:13:32):

Thank you, Jeroen. Uh, actually the debate has already gone a long way in pointing out pitfalls and opportunities of low interest rate environment. I would start from Mario’s point, which, uh, should set, uh, framework for all policy decisions related to lower interest rates.

Speaker 3 (00:13:56):

That lower interest rates are not here for to stay forever. At some stage we will see some return to some normal state of- of the world, including interest rates that are a little bit higher at least.

Speaker 3 (00:14:10):

Uh, so this to me, uh, suggests that the lower interest rate environment should be seen [inaudible] what I like to call a window of opportunity. Christine already alluded to that in terms of [inaudible] a- a weaker euro, uh better inflationary expectations, and of course easier monetary provisions.

Speaker 3 (00:14:29):

And therefore the first- the first, uh, implication I would draw for policy is, uh, since there is a window of opportunity, which by definition will close up sooner than expected possibly, please let’s all not make the mistake of not exploiting that window of opportunity by pushing forward the [inaudible] programs that in many, our- our cases, certainly in my case if I may, uh, is very much at the center of the agenda.

Speaker 3 (00:14:58):

This is a very general point, which does not relate to technicalities of the fiscal implications.

Speaker 3 (00:15:03):

Second, this has been mentioned by both, and I will not dwell on it. But it’s very important. What can we do to, uh, help, uh, institutional investors do better in such an environment?

Speaker 3 (00:15:16):

Of course the assumption that these low rates will go away at some stage, will have to impact on long term investment decisions. So it’s not just, uh, it’s not that straight forward how, what are the implications for institutional investors? Although I very much subscribe to the view that more, uh… a larger choice set, let me put it that way. A larger choice set should be allowed to these investors.

Speaker 3 (00:15:16):

Having said that, but then Pierre pointed out very clearly, of course the lower interest rates come along with an environment, where nominal growth, both nominal and real growth are lower, and inflation is also, uh, not high enough.

Speaker 3 (00:15:57):

So from that point of view, of course the impact on public finance of- of, uh, nom- a low nominal growth en- en- environment, has other implications. One must mention that- that it has caused an implication on revenues, which themselves would be lower.

Speaker 3 (00:16:12):

And this of course, uh, adds to the environment as, uh, the benchmark against which we have to assess. But also another point maybe worth mentioning, that while we have lower interest rates on- on government debt for a number of reasons, it is not always obvious to what extent this is transmitted to other interest rates in the market, to what extent there is a channel [inaudible] in terms of easier financial conditions or not. This may work both ways. But, uh, it’s also important to, uh, to take that into account.

Speaker 3 (00:16:48):

Coming to the point that was central in the presentation very quickly, uh, what should we do with that space that is generated by lower nominal, uh, interest rates?

Speaker 3 (00:16:58):

A- apart from measurement problems, how do we exactly measure the additional fiscal space generated by lower rates? Which has to do with the well known problems of measuring the impact, uh, on, uh, uh, uh, w- what is the cyclical impact? What is the impact of cyclical conditions on potential output, uh, coming from that, uh, just, uh, [inaudible 00:17:18]?

Speaker 3 (00:17:20):

I want to conclude with, uh, two lessons that I would, uh, draw. One, uh… Actually three lessons. One is, uh, yes that, uh, the, uh, amount of resources, uh, freed up by that window, should, uh, be devoted to, uh, making your fiscal stance stronger.

Speaker 3 (00:17:40):

Uh, which however can be seen in a number of ways. Not only, uh, uh, not only, uh, moderating your spending, but also modifying the composition of your spending towards more capital investment, which in many cases is complementary to the structure [inaudible 00:17:58].

Speaker 3 (00:17:59):

And of course I very much subscribe to [inaudible 00:18:02], uh many times [inaudible] the point that we, uh, we need good projects rather than good money. I fully subscribe to that, and I keep saying it around the world [inaudible] quoting you if I may.

Speaker 3 (00:18:13):

Um, the other point, and I’m finished, is that there is, uh, and opportunity with lower interest rates to improve debt management. To take benefit of the immediate lower cost of funding for the budget. And so to, uh, reassess the structure of your funding, your- your debt management, which will be helpful once at some stage the interest rate environment will be higher.

Speaker 3 (00:18:40):

So this is an additional element we should be taking into account, into asking what can we do to use that space, in order to improve our fiscal sustainability? Thank you.

Jeroen Dijsselbloem (00:18:49):

Thanks very much [inaudible] for your reflections. Uh, [inaudible] different perspective perhaps, or a different country to reflect on the same.

Alexander Stubb (00:19:03):

Thank you very much [inaudible 00:19:04]. As it’s my first intervention from the euro group, I just wanted to thank you all, and say how privileged I feel to be in this group. I remember when I was a young civil servant, the Finnish [inaudible] representation, youngish, 1999, I was a deputy [inaudible] so the guy who takes notes in the back [inaudible] foreign affairs council, European council, finance ministers always had sort of a mythical, uh, aura about them. I always felt that they’re a little bit, you know, out there, a little bit strange and institutional, especially EFS. That was your, the big thing.

Alexander Stubb (00:19:46):

And climbing aboard the institution, I feel very privileged to be here. And I guess in my previous capacity, um, uh, as PM, I sort of felt that I was Jack of all trades, but master of none. Now suddenly I feel I have to be here as a master of lower interest rate environment windfall.

Alexander Stubb (00:20:03):

Uh, so I feel quite humbled to make this intervention. If I sound good, you should probably thank [inaudible] next to me. If I sound bad, you know that my learning curve is still quite steep.

Alexander Stubb (00:20:14):

Uh, I’ll be quite brief looking at this issue, uh, from the Finnish perspective, by making basically, uh, three, uh, general, uh, remarks. Obviously we agree with the conclusions of the Commission. But the remarks are- are pretty much on the analysis, uh, side.

Alexander Stubb (00:20:33):

The, uh, first, uh, remark is that we see, much as the previous speakers, the decline of interest rates coming from two different aspects, and thus having probably, uh, two different implications.

Alexander Stubb (00:20:47):

So the two reasons are, one is the retreat of the sovereign debt crisis, which has obviously [inaudible] at least until, uh, last week. Uh, and- and it’s helped all the risk countries. There’s no question about that. But then it hasn’t affected the non-risk countries that much.

Alexander Stubb (00:21:07):

And the other reason is obviously low growth, uh, where, uh the key role uh, has pretty much affected all of us in- in one way or another. I assume that in this role you’re not supposed to comment about the ECB, ECB that’s why I’ve always given my full support to what the ECB has done, not least in quantitative easing, not least in keeping actually interest rates low, and trying to get our, uh, economies going. So some benefit from both, and others from just one.

Alexander Stubb (00:21:35):

Now, a second point is what kind of effects does this have? Um, I guess if it’s linked to the prices, uh, this was said I think quite eloquently by the Italian minister. Then we should try to reduce, use the moment to try to reduce, uh, debt right now.

Alexander Stubb (00:21:54):

Then on the other hand if it’s linked to growth, my question is, is it really windfall [inaudible 00:22:00]? Or is it something that we should have perhaps predicted, [crosstalk 00:22:04]?

Alexander Stubb (00:22:06):

The final point is very much from a Finnish perspective. I guess the report looks very much at the debt side, uh, debt [inaudible 00:22:14]. But in Finland I guess is a slightly different case. Because for us we’re in a situation whereby we have public assets, much more than debt. I think the ratio is something, our debt is, uh, 100 billion euros, uh, and our public assets approximate to 185.

Alexander Stubb (00:22:35):

So [inaudible] on the asset side, we actually feel disadvantageous that the interest rates a low, because we don’t gain anything. Whereas obviously the debt side, uh, we win a little. So this was what I wanted to say as part of my first intervention, and, um, trying to figure out [inaudible 00:22:51].

Jeroen Dijsselbloem (00:22:51):

That learning curve is coming along quite nicely. Thanks. [inaudible 00:23:05].

Luis de Guindos (00:23:07):

Thank you [inaudible 00:23:08]. Uh, the- the interest rate that matter for- for the economy are not nominal interest rates, are real interest rates. And, uh, inflation rates all over, all over Europe, uh, have been very low, uh, lately.

Luis de Guindos (00:23:25):

So real interest rates, uh, are real- are really, uh, uh, uh, higher than nominal interest rates. So, uh, you know there is a- a parallel evolution of nominal interest rates, and inflation expectation, and actual inflation- inflation rates.

Luis de Guindos (00:23:42):

Even if we look at, uh, the impact on the fiscal policy, it’s obvious that, uh, lower nominal interest rates have any positive impact on the evolution of the, uh, of the- of the- of the deficit, on the expenditure side. But simultaneously very low, uh, uh, inflation rates, and very low, uh, nominal GDP growth rates also have an impact, a relative impact.

Luis de Guindos (00:24:11):

So, I think that we are going to live a process of normalization. I think that nominal interest rates will go up, in parallel with the evolution of inflation expectations. And, uh, well, we have had a windfall profit, let’s say because of the low environment, or the environment of low interest rates.

Luis de Guindos (00:24:31):

But simultaneously, simultaneously I think that higher nominal growth rates will be a helping hand for tax revenues. And this is something that we have to take into consideration.

Jeroen Dijsselbloem (00:24:44):

Thank you. Uh, other colleagues? No? Um, I think that was, a very, uh, very good discussion. I want to thank the commission for the preparatory work, and- and Pierre’s presentation. Um, Pierre I could not see in the, um, in the sheets that I have, I could see where the, um, fall in interest payments is for the different countries. But I couldn’t see how different countries had used that windfall.

Jeroen Dijsselbloem (00:25:17):

You made the point that many countries, uh, have used it to do less on the expenditure side, but I couldn’t actually see on the sheets. Or perhaps there have been sheets for that. I was of course interested to see how my own country was doing, how we had been using this opportunity.

Pierre Moscovici (00:25:36):

We’ll provide you with the results of your country. [inaudible] uh, which I will answer. Let me, uh, uh, work especially on that [inaudible] my colleague [inaudible 00:25:51]. But, uh, [inaudible 00:25:54].

Jeroen Dijsselbloem (00:26:00):

Perhaps as a follow up this discussion, when we come back maybe after the summer, also on- on those issues, let’s say the downside issues, for pension funds, insurance companies, and what that would, uh, uh, mean in terms of policy. Uh, perhaps we can have a second round, uh, on- on those, uh, issues. [inaudible 00:26:a9] Thomas [inaudible 00:26:22].

Speaker 2 (00:26:25):

[inaudible 00:26:25].

Jeroen Dijsselbloem (00:26:27):

Thanks very much. Thanks for your, all your contributions. And I think we must follow the, um, the use of this windfall, as far as it is a windfall, is one of the issues we’ve debated, follow the use of the- the- these windfalls in the different countries.

Jeroen Dijsselbloem (00:26:46):

I would like to, uh, move onto the European semester. Uh, specifically the euro area recommendations. Um, certainly we have the sequencing of our items right. [inaudible] views on, uh, IMF’s article four. Then we had [inaudible] views on the windfalls, uh, the low interest rates finance. Uh [inaudible] turn to the draft recommendations of the euro area, for the euro area, uh, which are a, uh, part of the European semester.

Jeroen Dijsselbloem (00:27:21):

[inaudible] recommendations, uh, are addressed to all of us collectively. Uh, are important to provide an overall frame to the ones given to individual member states, that will be discussed tomorrow in the, uh, [inaudible 00:27:37].

Jeroen Dijsselbloem (00:27:37):

Uh, in the euro group we have already stepped up our efforts, and our involvement to follow up on these recommendations. And we will continue, uh, to do so. So I will first, uh, ask the commission, uh, to present, um, uh, the issue, and then turn to the others.

Speaker 6 (00:27:49):

[inaudible] uh, okay. Uh, thank you, uh, Pierre [inaudible] colleagues on euro area [inaudible 00:28:03]. So it’s a package of, uh, not any specific recommendations, or [inaudible 00:28:12], uh, the Commission [inaudible] as usual [inaudible] recommendations for the euro, uh, area.

Speaker 6 (00:28:17):

As for individual member states, the recommendations [inaudible] challenges as presented in [inaudible] and in subsequent discussions, uh, [inaudible] and, uh, also [inaudible 00:28:49].

Speaker 6 (00:28:48):

Uh, as, uh, [inaudible] recommendations [inaudible] necessary policy action in areas of structural reform, fiscal policy, financial [inaudible] policy, and [inaudible 00:29:02].

Speaker 6 (00:29:05):

They also [inaudible] positions that the euro [inaudible 00:29:06]. [inaudible] semester that [inaudible] shorter and they’re focused [inaudible] and based on the relevance for the euro area as well [inaudible 00:29:24].

Speaker 6 (00:29:24):

[inaudible] good discussions on the substance of the CSRs, and, uh, [inaudible] as we see [inaudible] issues on the [inaudible 00:29:28].

Speaker 6 (00:29:33):

So, uh, now I can briefly take you through the comment of the new recommendations for the euro area. Just brief comments. So on CSR1, on structural reforms, calls for increased peer pressure [inaudible] that facilitates the correction of large internal, and external [inaudible 00:29:46]. Uh, which, uh, still are large [inaudible 00:29:52].

Speaker 6 (00:29:52):

[inaudible] which would increase growth and [inaudible] in the euro area. A specific responsibility here was [inaudible] member states, which require [inaudible] necessary efforts.

Speaker 6 (00:30:18):

So, uh, we have, uh, so far [inaudible 00:30:18], uh, positive, uh, assessments, uh, of the euro group’s [inaudible] discussions, and uh, and [inaudible 00:30:26].

Speaker 6 (00:30:31):

Then say something on, uh, fiscal policy, reflects the fact that a lot has been achieved since the crisis in terms of fiscal, like in terms of fiscal outcomes. But continued effort is needed [inaudible] fiscal policies, also ensures [inaudible] fiscal stance [inaudible] sustainability risks, and cyclical conditions across the euro area.

Speaker 6 (00:30:46):

This is no more a contradiction, but is a need to respect the stability, and [inaudible] environments [inaudible 00:30:46]. It is a [inaudible] fiscal stance in, uh, euro, uh, area.

Speaker 6 (00:30:46):

So, uh, making, uh, improvements in the quality and sustainability of fiscal, uh, finances [inaudible] investment, and making [inaudible] systems [inaudible 00:30:46].

Speaker 6 (00:30:46):

Here [inaudible] on the euro [inaudible] discussions [inaudible] in the right direction. Also essential [inaudible] national fiscal [inaudible 00:30:46].

Speaker 6 (00:30:46):

CSR three on, uh, financial sector policy, calls for a number of initiatives related to [inaudible] economy. [inaudible] that, uh, uh, [inaudible 00:32:03]. Despite recent improvements, financial [inaudible] remains, uh, uh, [inaudible 00:32:04]. Effort is committed to [inaudible] market based finance, and to reform [inaudible 00:32:04]-

INAUDIBLE (00:32:04):

This segment could not be transcribed due to issues with the source file.

Yanis Varoufakis (01:36:00):

The EKAS that Pierre mentioned, from the lowest of the low of pensions as the institutions have asked. Because that would push the poorest of the poor into grave- d- greater poverty and create a wave of hostility to whatever agreement and r- reform package we agree upon. In our proposals to the institutions we have offered very serious reforms. We’ve offered an extensive, but optimized privatization agenda spanning the period from this year to 2025. We’ve offered, offered, proposed the creation of a fully independent tax and customs authority under the aegis of the provision of parliament so that politicians, uh, but also corporate interests, h- hold no sway over tax collection. We proposed a fiscal council that oversees the State budget, a short-term program for limiting foreclosures and managing non-performing loans, judicial and civil procedural code reforms, liberalizing several product markets and services, am- elimination of many nuisance charges. Public administration reforms introducing, for instance, proper staff evaluation systems, reducing non-wage costs, modernizing and unifying public sector payrolls.

Yanis Varoufakis (01:37:22):

In addition to these reforms, the Greek authorities have engaged the OECD to help our government design, implement and monitor a second series of reforms. Only yesterday I met with the OECD’s Secretary General, Mr. Gurría, and his team and mine announced a joint reform agenda complete with a specific road map that we’ve, we’ll focus on. A major anti-corruption drive and relevant institutions to support it, especially in the area of procurement. Liberalizing the construction sector, including the market and standards of construction materials. Wholesale trade liberalization. The unification of, uh, electronic and press codes of practice in the media. One-stop business centers that eradicate the bureaucratic impediments to doing business in Greece. Help on the front of pension reform, where the emphasis will be on proper long term actuarial studies, the phasing out, almost complete eradication of early retirements; the reduction in the operating costs of the pension funds; pension fund consolidation.

Yanis Varoufakis (01:38:35):

Yes, colleagues, Greece needs to adjust further. But what we are calling upon is to agree with us, to concur with the difference between reforms that are attacking parasitic rent-seeking behavior on the one hand, or inefficiencies and, on the other hand, parametric changes that jack apt- jack up tax rates and reduce benefits to the weakest. We need a lot more of real re- reforms and a lot less of the parametric type.

Yanis Varoufakis (01:39:08):

Now, much has been said about backtracking on labor market reform and our determination to bring in to the equation again, collective bargaining agreements in con- collaboration with the International Labor Organization and the OACD. Is this some kind of left wing fixation we have with collective bargaining? No, it is not. I’ll give you an example: Young workers in several chain, uh, stores get fired as they approach their 24th birthday so that this employer hires younger workers in their place to avoid paying them the extra €80 a week, or a week … A month, I should say, which along the lines of existing minimum wage legislation applies to under 24 year olds. Or take the case of employees who are hired part-time for less than €300 a month, but which are, who are made to work full-time and threatened with dismissal if they complain.

Yanis Varoufakis (01:40:12):

Without a system of smart collective bargaining agreements these abuses abound with ill effects and competition because decent employers don’t do this and they have to compete against employers who do. But also with ill effects on pension funds. Does anyone seriously think that the introduction of a well th- thought out collective bargaining, uh, framework, in collaboration with international instit- institutions, like the ILO or the OACD, constitutes reform reversal or backtracking? We don’t think so.

Yanis Varoufakis (01:40:45):

Now, briefly allow me to turn back to pensions. Much has been made of the fact that the pensions account in Greece form more than they did in the past, as much as 16% of GDP. However, consider this: Pensions have shrunk by almost 40/45%, and the number of pensions, pensioners, is stable. So expenditure on pensions has fallen but the percentage has increased because GDP has collapsed over the last five years. Our alleged backtracking on pension reforms is that we have suspended the further reduction in pensions that have already lost 40% of their value when, and this is important, the prices of goods and services that pensioners need, like pharmaceuticals, have hardly moved. Consider this rele- relatively unknown fact: Around one million families, that is a very large number in a population of 10 million, survive today on the meager pension of a grandfather or a grandmother as the rest of the family members are unemployed in a country where only 9% of them employed have ever collected any unemployment benefit. Diminishing that one solitary pension in those households is tantamount to turning a family into the streets.

Yanis Varoufakis (01:42:05):

This is why we keep telling the institutions that, “Yes. We need pension reform. But, no. We cannot just cut 1% of GDP off pensions through one way or the other without creating substantial hardship and also giving another turn to the wheel of the recessionary forces.” If 1.8 billion is taken out of this economy from the lowest of the low of social strata if you take into consideration the multiplier effects that the IMF has con-, uh, confessed in the past to have underestimated. We’re talking about another spin of the deflationary wheel.

Yanis Varoufakis (01:42:46):

Now, I suppose that institutions are asking us to eliminate these solitary, solidarity pensions, the EKAS, because already this, the, the, the distribution of pension income has been compressed so much that if you’re going to reduce pension costs today by 1% of GDP you have to attack the lowest of the low of pensions. It can’t be done any other way.

Yanis Varoufakis (01:43:12):

Structural reforms, colleagues, of course, promote b- growth potential, but mere cutbacks in an economy like Greece is, promote recession. Greece must adjust by introducing genuine reforms, as I said. But, at the same time, going back to Doctor Blanchard’s que-, uh, answer, or question, I believe the institutions need to adjust their definition of growth enhancing reforms to acknowledge that parametric cuts and tax hikes are not reforms that will help Greece today. Now, colleagues have remarked in the past in the Eurogroup, and I understand that, that our pensions are higher than theirs, and they fear that the Greek government may be having designs to ask in the context of a transfer union that we do not have, as Pierre said, for your pensioners to be supporting ours. Let me be very clear on this. We’re never going to ask you to do this. We’re never going to ask you to subsidize our State, our wages, our pensions, our public en- expenditure. Indeed, this is not a transfer union.

Yanis Varoufakis (01:44:18):

But, colleagues, the Greek State has been living within its means for a while. Over the past five months we have even managed, despite zero market access and zero disbursements, to repay up to eight billion to our creditors and do intend to keep doing so. Now, I understand there are concerns that our government may slip into a primary dece- deficit again. And I think, I, that this is the reason why the institutions are pressing us to accept large VAT rises, parametric changes and parametric pension cuts. Now, while there’s a view that the announcement of a viable agreement at early next, uh, early next week I, we, one hopes, will suffice to boost economic activity sufficiently to generate a pri- a healthy primary surplus, I understand perfectly well that our creditors, you, may have cause to be skeptical and to want safeguards, an insurance policy against our government’s possible slide into profligacy again.

Yanis Varoufakis (01:45:24):

This is what I believe lies behind Doctor Blanchard’s call for the Greek government to offer, and I quote, “Truly credible measures.” So here comes an idea: What we consider to be a truly credible idea. Instead of arguing over half a percentage point of measures or whether these measures should be parametric or, uh, administrative, how about a deeper, more comprehensive, permanent reform? An automated hard deficit break that is legislated and monitored by the independent fiscal council that we, and the institutions, have already agreed upon? The fiscal council would, under this agreement, monitor the State’s budget execution on a week by week basis, issue warnings if a minimum primary surplus target looks like being violated in the foreseeable future and, at some point, the fiscal council, the independent fiscal bo- council could trigger automated across the board horizontal reductions in all State outlays so as to prevent the slide below the pre-agreed threshold for the, for the primary surplus. That way we will have a fail safe system that ensures the solvency of the Greek State and its primary surplus while the Greek government retates, retains the policy space it needs in order to remain sovereign and able to govern within a democratic context.

Yanis Varoufakis (01:46:57):

Consider this a firm proposal that our government is prepared to implement as part of an immediate agreement. Now, given that our government will never again need to borrow from our ta- from your taxpayers or from the taxpayer standing behind the International Monetary Fund, the debate should now move, or should quickly move, from pensions and VAT to the very central question about primary surpluses. How large should they be?

Yanis Varoufakis (01:47:28):

Does anyone seriously believe that the growth rate of an economy like ours who’s been deprived of serious bank credit and investment flows is, uh, independent of the primary targets set? The IMF understands fully that the two numbers are linked endogenously. And this is the reason why Greece’s public debt must be looked at once again. Our large debt overhang should be thought of as a large unfunded tax liability. While it is true that the HFSF and GLF slices of our debt are long dated and the interest rate is low, it is also true, colleagues, that the Greek State’s unfunded tax liability, our debt, features a lumpy component that impedes investment and recovery today. I am referring here, in particular, to the 27 billions of SMP bonds still held by the ECB. Now, this is short-dated, unfunded liability that potential investors in Greece, even after an agreement has been struck, will take a look at and turn back because they can see the funded gap this part of our debt creates because they recognize that this lump of 27 billion on the books of the ECB stops Greece from taking advantage of quantitative easing while, at the same time, creating a short term funding gap.

Yanis Varoufakis (01:48:56):

It is indeed an irony, perhaps a cruel irony, irony, that the country most afflicted by deflation in the Eurozone today, is the one, the only one, effectively, that is excluded from the ECB’s anti-deflation remedy, and it is excluded even after an agreement has been struck because of this lump of 27 million, billion of SMP bonds. So our proposal of this front is I, we believe simple, efficient and mutually beneficial. We propose no new monies, not one fresh Euro, for our State. No new debt for Greece. But imagine the following three part agreement to be announced at a press conference over the next few days.

Yanis Varoufakis (01:49:40):

Part one: The deeper reforms that I mentioned, including the automated hard deficit break that I suggested. Second part: A rationalization of Greece’s debt repayment schedule along the following lines: First, to effect an SMP buy back from the ECB, Greece would acquire a new loan facility from the ESM, would use it to purchase the SMP bonds back from the ECB and to retire them. To underpin this loan, like every loan agreement needs a conditionality, we could agree that the deep reform agenda that will be part of this agreement acts as a common conditionality for successfully completing the current program and for securing the new ESM arrangement that comes into operation immediately afterwards and runs concurrently with a continuing IMF program until the end of March 2016.

Yanis Varoufakis (01:50:38):

Short term funding relies on the outstanding disbursement for the current program. And medium to long term funding is completed by the return of the SMP profits coming up to about nine billion out of the 27, which will go, could go into an us- escrow account, doesn’t come to Greece at all even, so as to repay in the medium term, the IMF.

Yanis Varoufakis (01:51:03):

And part three of this agreement, as we envisage it, is an investment program for kick starting the Greek economy. Nothing to do with the Eurogroup that would, could be part of the Junker Plan, the European Investment Bank, with which we are in talks already, the ABLT and other partners, who will be invited to participate, also in conjunction with our privatization program and the establishment of a development bank that aims at developing, reforming and collat- collateralizing public assets, including real estate owned by the State.

Yanis Varoufakis (01:51:40):

Does anyone doubt that such a three part announcement would dramatically change the mood, inspire Greeks to work hard in hope of a better future, invite investors to a country who’s asset prices have fallen so dramatically and give confidence to Europeans that Europe can even, at this eleventh hour, do the right thing? Colleagues, I close by saying, at this juncture, it is dangerously easy to think that nothing can be done. Let us not fall prey to this state of mind. We can forge a good agreement. Our government is standing by with ideas, with a will to compromise further, and with a determination to cultivate the two forms of trust necessary to end the Greek gov- the Greek drama. Your trust in us, and the trust of our people, both in their government and in Europe’s capacity to produce policies that work for them too. Thank you.

Jeroen Dijsselbloem (01:52:44):

Thank you. Um, colleagues, I ought to give the floor to the ministers who have not had a chance to speak on this for some time, who have followed it closely and who have listened to the institutions and Yanis [inaudible 01:53:00]. Um, so I will give the floor to [inaudible] to make a remark that’s a suitable perspective from where I am, and my perspective comes from the statement that we agreed upon on February the 20th that, within that framework, there is, there is no agreements, uh, yet within reach between institutions and Greek side. Um, some of the measures that have been taken in the meantime in Greece were outside that framework agreement. We are, therefore, far away from, uh, getting anywhere today.

Jeroen Dijsselbloem (01:53:39):

Having said that, uh, I think that any new proposals being brought up today or in the coming days will have to be looked at at the institutional level first in order for the Eurogroup to assess them in its meeting. Um, this is where we are. Having said that, um, I don’t have the, uh, … Let me open up the floor to, uh, ministers first be- before going any further [inaudible 01:54:08]. Who would like to respond. [inaudible 01:54:14].

Michael Noonan (01:54:19):

First of all I’d like to thank the [inaudible] for briefing us. And I’d like to, like to thank Yanis for his very full presentation. Uh, the only mandate I have and the only thing I agreed to was the statement of, uh, February the 20th. And, uh, I know a lot of talks have taken place since then. Uh, first of all, I’d like to get a copy of the aide-memoire. It has been leaked extensively. I read it in the newspapers, but no one has sent me a copy.

Yanis Varoufakis (01:54:48):


Michael Noonan (01:54:48):

So I’d to-

Yanis Varoufakis (01:54:48):


Michael Noonan (01:54:48):

… I’d like the Aide-memoire-

Yanis Varoufakis [privately] (01:54:51):

Good point.

Michael Noonan (01:54:51):

… if that’s the basis of the negotiations.

Jeroen Dijsselbloem (01:54:54):

The Aide-memoire [inaudible 01:54:54].

Michael Noonan (01:54:54):

Uh, Pierre Moscovici has set out the position rather clearly, and, uh, he seems, again, to think that the gap that was now existing between … The position in the Aide-memoire and the Greek authorities. But that-

Yanis Varoufakis (01:55:13):

[crosstalk 01:55:13].

Michael Noonan (01:55:13):

… [inaudible] has set up on a, a totally new voyage now, and there doesn’t seem to be any need-

Yanis Varoufakis (01:55:18):

[crosstalk 01:55:18].

Michael Noonan (01:55:18):

… for new positions at all. I would have felt, in the normal course of negotiation, one would deal with specifics and try and narrow the gap by dealing with specifics, and that doesn’t seem to be the position. Uh, I’m concerned about the situation, as everybody else is, but I think that a bad agreement might be worse than no agreement. I think if that agreement could be more corrosive of the Euro, then no agreement at this point. Uh, so I think we have to, uh, reflect on everything that’s said here today and, uh, face the reality that there may be no agreement, and take the necessary steps for that eventuality. Thanks very much, Jeroen.

Yanis Varoufakis [privately] (01:56:08):

Mm. Did you hear that?

Jeroen Dijsselbloem (01:56:08):

[inaudible] please, Johan.

Speaker 10 (01:56:19):

[inaudible 01:56:19]. I’ve seen this situation [inaudible] and, uh,

Jeroen Dijsselbloem (01:56:19):

All right.

Johan Van Overtveldt (01:56:40):

… this, uh, very clear situation that, uh, private institutions, uh, these … And Greece is still, on the basis of the problems were watered down to a large extent, and I’m questioning whether this [inaudible] were not [inaudible] institutions. There was actually, uh, a [inaudible] by the institutions that, even with this watered down program, [inaudible] is not solving. So it has the final conclusion of three institution after all these months. I think that we should get this done today. If, if you decided every transformant under these conditions, uh, that are watered down, and those conditions are not accepted by the [inaudible 01:57:19], then we, we are at the end and conclusions should be made that stop with this process, which actually hampers financial markets and their struggle to put their trust in the you, new [inaudible] and [inaudible] members [inaudible 01:57:44].

Johan Van Overtveldt (02:00:35):

The United States usually is the difference in corporate duties between the United States and Europe is part of Europe is the [inaudible] used to solve, in s- in solving cases. And we’re just dragging along. I’m not sure that that is sensible. I would take a decisive action, and decisive action is no action at the moment.

Jeroen Dijsselbloem (02:01:15):

[inaudible 01:58:27].

Michel Sapin (02:01:15):

[French 01:58:27-02:05:46 with interpreter overlapping].

Yanis Varoufakis [privately] (02:01:15):

Πολύ καλό, καλύτερο από ποτέ.

Speaker 13 (02:05:53):

Thank you Jeroen. There are mende- many things have been said-

Yanis Varoufakis (02:05:55):

[crosstalk 02:05:55].

Speaker 13 (02:05:55):

… but one of the most important things this afternoon-

Yanis Varoufakis (02:05:59):

[crosstalk 02:05:59].

Speaker 13 (02:05:59):

… in terms of this situation has been, uh, outlined by everybody. You might even argue that maybe [inaudible] some data [inaudible 02:06:12]. I think there needs to be an enormous sense of urgency because, obviously, this is something that cannot continue to, to say the least. Uh, furthermore, I find it a little bit surprising that, uh, clearly this, I would say, in the weeks of no negotiations, we are suddenly confronted with, uh, [inaudible] proposals, which is, obviously, [inaudible] outlined [inaudible 02:06:41], uh, examined, uh, and elaborated upon [inaudible 02:06:52]. So I think there is a [inaudible] contradiction between us wanting and introducing new, uh, propositions at this point in time with such a weight. And, on the other hand, the clear utmost sense of [inaudible] is needed given, uh, the date [inaudible 02:07:08]. We cannot just, uh, sit back and relax.

Jeroen Dijsselbloem (02:07:17):

[inaudible 02:07:17].

Maria Luís Albuquerque (02:07:21):

[inaudible 02:07:21]. I would like to, to express my… perplexity maybe, because when we decided on February 20th to give a mandate to the institutions to try and to close the second program and [inaudible] arrangements, uh, that was under the assumption and the, the mandate that the, uh, MOU, would be followed.

Yanis Varoufakis (02:07:45):


Maria Luís Albuquerque (02:07:51):

[inaudible] correct me what was said by the institutions is that that, that there was some, um, significant effort to make those missions [inaudible], um, [inaudible] in line with the accepted line by the Greek authorities. And yet when I listen to Yanis [inaudible] but overall the spirit and the tone and the substance seems to be, at least to me, exactly the same we heard on the 11th February. And that makes very difficult [crosstalk] the agreement [crosstalk] [inaudible] and I’m not sure how much [inaudible] but at least the way [inaudible] at this point, is that there has been no movement from the Greek side despite the fact that there was movement from the institutions even if [inaudible] not completely in line with the terms of the original of the MOU which was the mandate [inaudible].

Jeroen Dijsselbloem (02:09:06):

Thank you. [Inaudible]

Benoît Cœuré (02:09:12):

Thank you Jeroen. I share the perplexity [inaudible] that was just voiced by Maria Luís. I would like to say just three things. And the first is um, I appreciate the comments of the three institutions today, in particular the details that Christine Lagarde has given us, about this diluted version which in fact is not known to us [inaudible] and I agree with Michael Noonan, we have heard about that diluted version but we do not know exactly what’s inside.

Benoît Cœuré (02:09:52):

I think it is an encouraging movement that the institutions have tried to bridge the gap, and as Michel Sapin rightly said, will come from the primary surplus of 3% to a primary surplus of 1 % [inaudible] which is definitely a huge move, and nevertheless, uh, I don’t think that we can summarize the situation by saying that because there has been movement on our side and probably also on the Greek side that we are getting very close in terms of numbers or this diluted version which is in fact a [inaudible] short term compromise and in fact, the two questions I would like to raise are the following. The first one is what are the needs, the financial needs of the Greek government in the short to medium term, and by medium term I don’t mean five years, I mean six months to a year.

Benoît Cœuré (02:10:52):

And there, I think that the Commission has told us the numbers are starting to become quite impressive and they go beyond they go beyond the 7.2 per cent, er, the 7.2 billion that are in the present program. So do we have a calculation of what are the needs over six months to one year, not only in terms of repayment of credits, but just in terms of the needs of the government and of the economy. That brings me to my 3rd remark. When I see the outflows that have been described by the European Central Bank, obviously I am very worried.

Benoît Cœuré (02:11:30):

Second, we know that the economic situation has deteriorated quite a lot, in Greece, in the last couple of months, because when we agreed on the provisional agreement on February 20th we were still assuming that there would be growth in Greece and we see that that is not the case. So we have an economy that is deteriorating, investments that go out or outflows that are rising very very quickly, so we have at hand an economic situation that has become even more difficult than what we were expecting before.

Benoît Cœuré (02:12:07):

So, today’s two questions, what is the real economic situation today and what are the needs in the months to come in terms of finance, does that have an influence on the agreement that we want to have by the end of the month? I can put it also differently, do we want to have a kind of short term fix or do we want to have a little bit more a medium term solution to these problems?

Unidentified speaker (02:12:44):

I will continue off where Pierre has left off. I’m not going to talk however on technicalities. I think we have to admit that we are faced with a stalemate, and my point is about the lack of information and the need for more transparency. Now, we all understand that when negotiations are taking place [inaudible] for secrecy because that helps come to a resolution but when that success does not come about then I think whoever is representing us and we need now more transparency.

Unidentified speaker (02:13:38):

I am not implying that the Greek government and the institutions are not transparent. I’m just saying that at this stage we need to know more of what is being taking place. For example [inaudible] the question that we all have no idea [inaudible] of what is [inaudible] and the Greek people need to know too. So, and our people back home want to know too. And in this case of stalemate, I do not think we should go down, downhill not knowing exactly what were the issues and how far the two groups have been [inaudible] so [inaudible] although we have been given a lot of information [inaudible] speaking for myself, I do not have a very clear picture of where the two sides are [inaudible] reaching a successful agreement.

Jeroen Dijsselbloem (02:14:34):


Luis de Guindos (02:14:36):

It is truly a pity that we have reached this situation and, you know, letting aside the technicalities that in my view are not important in this present juncture, and taking into consideration what Mario Draghi has said about the evolution of capital flights and the poss- flights, if today we do not have, you know, any sort of conclusive communication – that I think that is not possible – will the Greek banks be able to open up tomorrow?

Jeroen Dijsselbloem (02:15:23):

Perhaps I will ask Benoit to respond directly to that last [inaudible]


Benoît Cœuré (02:15:33):

The Greek banks will be able to open tomorrow. They have been granted emergency liquidity assistance by the Bank of Greece which has not been objected to by the governing council. If you ask the same question for Monday, I don’t know, it all depends on the pace of [inaudible] of the governing council of the ECB relies on the assumption that collateral is [inaudible] meaning that the Greek government is solvent and that the banks are solvent, so that’s an assumption that we have to reconsider virtually every day depending on the [inaudible] so for tomorrow morning [inaudible]

Jeroen Dijsselbloem (02:16:17):

Thank you colleagues, for your comments and questions [inaudible] perhaps I can go into a few questions and then make remarks about the process where we are. First of all, during the search between the institutions and the Greek side [inaudible] document to produce [inaudible] after months of bottom-up process, uh, the aide-memoire was an expression of a top-down process, saying this is where we could land, this where we could find each other. And except that, it has no formal status, you have to realize that. It was not agreed upon.

Jeroen Dijsselbloem (02:16:57):

The moment it is sent to us as a Eurogroup it would become a document and some ministers may have to send it to their parliaments etc. This is a thing that we really have to consider. So bilaterally, I am sure that the institutions are willing to inform ministers on the main headlines of the content of that document [inaudible] which I would be hesitative to make it into a formal document by sending it to the Eurogroup. We are in the midst of a negotiation, which has not led to results.

Jeroen Dijsselbloem (02:17:29):

My position has been, uh, I ve told [inaudible] in one of the meeting president Juncker and PM Tsipras, I have made very clear there that the Eurogroup does not in itself negotiate. This is done by the institutions. They will assess and value the proposals that are being put on the table. This is not the role of the Eurogroup. If within the framework that we have given, political mandate, some of you have quite rightly said that already what has been happening is outside of that mandate, but if within that mandate an agreement is reached between Greece and the institutions, then it is up to us to take political decisions on whether we want to take that to our responsibility and to our parliaments, that I think should be the order, but I understand. I fully sympathize with those of you that said we do not really have all the information, I think this is not possible, but if so required I’m sure the institutions can provide bilaterally more information on details, on the process and the content.

Jeroen Dijsselbloem (02:18:39):

The second point was made, what if we reach an agreement in the short term [inaudible] Pierre made that point, what is then the next step, what are the financing needs looking ahead, uh. Pierre has made some comments on that [inaudible] coming months, at least until the end of the year. It also depends on the package that is agreed, so for more final calculations on what the financing look like in the medium term and the long term will be made of course once there’s an agreement at hand, we are not there yet.

Jeroen Dijsselbloem (02:19:21):

It is absolutely true, and the Commission also say as well, that the situation, of course, in Greece is deteriorating rapidly, it has been since the beginning of this year, making the process moving forward even more difficult and challenging. On those of you that have said “has the time not come to draw conclusions”, I think that it’s not for us here to draw the conclusions. The process is not at an end, there is still a window of opportunity though it is very small and it is very challenging and it is first and foremost, I think most of you agree, to the Greek government to grasp that last opportunity in the coming days, I think also Michel made that point, the process does not end here today, we should not let it fall out of our hands at this point.

Jeroen Dijsselbloem (02:20:22):

The risks certainly for Greece, but also the Eurozone, cannot be underestimated. Having said that, I think that the role of the Eurogroup at this point is simply to take stock of the situation, to await further steps from the Greek government to work- to urge them to work with the institutions, come up with new proposals that can then be assessed. The Eurogroup stands ready to convene, to re-convene if an agreement is still possible. Then we will also go into questions like Pierre and others have asked, what does that mean for the medium term, what’s the prospect, etc.

Jeroen Dijsselbloem (02:21:11):

At the same time we must also be very clear in our communication that in any scenario we are determined to work closely together in this monetary union to strengthen the Eurozone, the Five President’s report will be very helpful in that respect, I think we have to make absolutely clear that in any scenario the Eurozone will come out strong. Any agreement, if still possible, will have to be credible also from that perspective, I think as Michael said it also has to be credible for the Eurozone as a whole and I think that’s a very, very important point.

Jeroen Dijsselbloem (02:21:58):

Those would be my conclusions at this point. In terms of communication… in terms of communication I would just like to go through a couple of lines of communication that I will use after this meeting, it is up to you to say whether you want to [inaudible] also. So I will say, on the basis of our discussion today, that the Eurogroup today took stock of the situation in Greece, it is very regrettable that so little progress was made in discussions between the institutions and the Greek government and that there is no agreement yet in sight. It is clear that the proposal of the institutions already include significant concessions towards the Greek authorities compared to the existing MOU, the current program agreed between Greece and the euro area [inaudible].

Jeroen Dijsselbloem (02:22:56):

Today I think we send a strong signal to the Greek authorities that it is up to them to fully engage with the institutions on the base of the aide-memoire in the framework of the Eurogroup statement of the 20th February. However, the current agreement, the current agreement expires in less than two weeks. An agreement is still possible but will have to be credible and solid both for the benefit of [inaudible] Greek recovery as well as the interests of the eurozone as a whole. And the Eurogroup is ready to reconvene as soon as there is an agreement on the policy which will [inaudible] those will in general terms be my lines of communication to be used after this meeting. Over to your suggestions. Wolfgang

Wolfgang Schäuble (02:23:46):

Sorry, I think you have rightly mentioned that we should be careful before distribute the so-called aide-mémoire to the Eurogroup because then you make it a document that [inaudible] never been agreed [inaudible] If you take it now, and you just said, that you want to take the statement as a base, I think we have as a Eurogroup, we have to stick to the MoU and to the statement of the 11th of February, which was by the way

[NB. Wolfgang is not even happy with the Juncker document!] [inaudible] statement which I have to present to my parliament for the prolongation of the program! And whatever you want to change, I would be bound by German law, [inaudible] for any change. And therefore… I would be very careful. Of course I am thankful for the three institutions, they have been asked – I know – by the Federal Chancellor, [inaudible] to make an attempt for something compliant possibly [inaudible] But this and this has been under the preconditions that there would be [inaudible]… And now that additional [inaudible 02:25:40] Therefore we should not use the aide-mémoire as a base, to be doubly clear. Our base at the Eurogroup is the MoU in line with the statement of 11th of February.

Jeroen Dijsselbloem (02:26:02):

Good point, I will adjust that. I won’t refer to the aide memoire. I’ll take that out [inaudible]

Hans Jörg Schelling (02:26:18):

Thank you Jeroen. First of all, in my opinion the institutions made a really wide interpretation of the agreement of February and I think that as a point to Wolfgang to say this aide-memoire was not the statement we made in February. I think it’s a good proposal, so it’s not a critique, but it is a very wide interpretation [inaudible] in February.

Hans Jörg Schelling (02:26:55):

And the second thing, which is important for me, Jeroen you say that it is up to the institutions to find a solution [inaudible]. I agree, but if they don’t find a solution it is up to the Eurogroup to discuss about the alternatives. And the same time we have, about some days, to discuss about a solution is the same, same short time which we have to discuss about the alternatives and I think to discuss about them [inaudible]is not the work of, by the institutions, it must be done by the Eurogroup.

Jeroen Dijsselbloem (02:27:47):

On your two points. First of all, what I certainly didn’t want is to trigger a discussion now about the aide-memoire and whether that is inside or outside the framework of the 20th of February. I don’t think we are in a position to judge, um, strictly speaking we haven’t [inaudible] the document um, so let’s leave that aside.

Jeroen Dijsselbloem (02:28:07):

The second point is that, quite rightly, if there is no agreement there are also decisions to be taken and you can be sure that we will act and we will prepare and the institutions are also preparing other scenarios, so you are not quite right when you say that other scenarios are not for the institutions to prepare but for us [crosstalk] but a lot of work will also have simply have to be done by the institutions even without our explicit decision. But in either scenario, work is ahead of us, that is for sure. Let me also say that if there is to be a Eurozone summit, which I don’t know, this is not up to us to decide, if there is to be such a leaders’ meeting, that must be and will be prepared by the Eurogroup. This is also in the rules and regulations, Eurozone summits will be prepared by the Eurogroup. So our involvement doesn’t stop here, that’s for sure. Our involvement is crucial and will stay crucial. Yanis.

Yanis Varoufakis (02:29:16):

Regarding the communication issue and the press conference that you are going to be giving, allow me to say that placing the onus squarely and entirely on the Greek side, and not on the side of the institutions or of the rest of the Eurozone, seems to us rather disingenuous. Especially given the fact that, as Michel Sapin said, we are all responsible as elected leaders and this is certainly not the end of the road.

Also, colleagues, Christine mentioned the end of, the discontinuation of the negotiations. I did not want to mention it when I spoke before but let me very clear on this. These negotiations ended because the other side ended them when they declared that they did not have a mandate to discuss further the fiscal targets and our ideas about debt. I must also make the point, following the lead from Maria Luis who said that she was puzzled, she expressed a certain puzzlement, allow me to express a certain puzzlement too. In my presentation I came up with what I be considered to be a rather significant idea about a hard deficit brake. And I am very surprised, and I made sure that I note this so that I can remember it later, that there was precisely zero discussion, not a single comment on it.

This is rather strange for a forum which supposedly was interested in the new ideas that the Greek government has to offer. Finally, and this is very significant, Jeroen you mentioned before the importance of confidentiality in this forum. Allow me to say that if it leaks from this room that the representative of the Central Bank questioned whether the Greek banks will open on Monday, while having given us succor that they will open tomorrow, if this leaks out of this room the Greek government will consider this to be a hostile act and I believe that it will undermine the integrity of our meetings. Thank you.

Jeroen Dijsselbloem (02:31:41):

I think we are going to come to an end of our discussion. I don’t think [inaudible] I will give the floor to two speakers [inaudible] [inaudible] and Luis, but, um, I think that also for communication reasons it is time that we come to an end of our discussion. Luis first and then Peter.

Luis de Guindos (02:31:58):

Yanis, nobody wants to trigger any sort of accidents, so I would not play that kind of game but the reality is the reality and the reaction of the market is going to be there. This is not a question about leaks or not leaks. This is a question about the reality that we have to confront over the next, the next days. So, I think that we are reaching, you know, we are coming to a head and I think that there are some events that are out of our control. So I think that we should have also a communication just to deal with this situation.

Luis de Guindos (02:32:38):

I suppose that tomorrow the reaction of the markets will not be positive, I suppose that the reaction of Greek depositors will not be positive, well it already has not been according to the [inaudible] by Mario Draghi, and this is something that we have to bear in mind, because this is the reality, this is the reality. So, I think that, Jeroen, you should prepare, you know, any sort of communication in order to make sure that, you know, in any potential scenario, we are going to confront and that the integrity and irrevocability of the Eurozone is going to be guaranteed in any potential scenario.

Luis de Guindos (02:33:25):

And I think that this is important because… I have said that from the beginning that I do not know how we have reached this point. I am not going to blame anybody. I have my = opinion but my opinion is not that important now. But I think that, you now, we are confronting a reality and we cannot forget this reality because otherwise we are making an important mistake.

Peter Kažimír (02:33:53):

Can I say [inaudible] I do not want to torture you, but so many questions should be raised. Exactly how many days should we wait for the completion? How many days? Just one week or the 29th June or 30th June? You know that all we know is that we have national procedures for any changes, especially Wolfgang with the Bundestag and with other parliaments.

And I am getting a little bit nervous because this is coming to be a dangerous situation for all of us. It is not just about one country, it is just about Greece anymore. And our destiny is in the hands of the institutions [inaudible]. I’m a little bit afraid that in this way of communication we are losing control of the situation. [inaudible] So just, at least this question of how many days should we wait?

Jeroen Dijsselbloem (02:35:17):

I think that we all know what the final day is, it’s when the program expires, and we all know that there are parliamentary procedures to be followed in a number of countries, but I will repeat my opinion and I think it is quite broadly shared that it would not be right to take a decision here today on whether we have come to an end of the process because we have not, that is my assessment.

Jeroen Dijsselbloem (02:35:50):

And with you, I am frankly worried about the time that remains, and that the, about the opportunities that still remain. I don’t think it would be wise for us to now to take a decision on whether we have come to the end of the process, we’ve not. But we have to make it absolutely clear that on the basis of the old MoU and the agreement of February 20th there is still a real opportunity to reach a new agreement. It will have to be on that basis and it will have to be agreed with the institutions first. That is also is my response to Yanis’ remark that we did not react to his new proposal.

Jeroen Dijsselbloem (02:36:10):

I did react to it by saying it must be discussed by the institutions first. He may not agree with that procedure, but this is how we work, it’s the only way we can work. We cannot assess new proposals being brought into the meeting like this. They have to be assessed and discussed with the institutions first. My assessment that there is still a window of opportunity and it is certainly in the interest of the Greek people to try and grasp that opportunity and we stand ready even though time is very very short [inaudible] to see whether that opportunity can be used and will be used.

Jeroen Dijsselbloem (02:37:11):

That is how I see the situation and [inaudible] that I’ve said that whatever the scenario is that we are going to enter in the next couple of weeks ,we must stand united in our determination to make this monetary union stick, stronger [inaudible] As I say in any scenario, that we stand united to take steps when and if necessary to strengthen our monetary union. I think that’s a crucial point, many of you have said so, quite rightly. Colleagues, realizing that this is a very unfulfilling conclusion, yet this is where we are, a conclusion [inaudible] institutions assess the situation in the coming days.

Watch Varoufakis’ comment at the following press conference

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