22 June – Eurogroup in Brussels

Wolfgang Schäuble threatens with capital controls.

Benoît Cœuré (00:00:15):

Details that gathered and for framework [inaudible] and it is uh [inaudible] this time. Um we have some of the measures to be more friendly, and less geared towards, the [inaudible] resolution [inaudible]. Uh. There is also some uh, um lack of [inaudible] on the construction of reforms. The documents is very much [inaudible] and we uh, are certainly, uh, want to know more and we will have questions [inaudible] called it market reforms and the new [inaudible] reforms [inaudible] specific uh but this I imagine could be part of discussion [inaudible 00:00:55].

Benoît Cœuré (00:01:00):

I would like to [inaudible] which Pierre mentioned which is [pensions; inaudible] this is about uh, for interest not only um with project ministers with this [inaudible] for markets and [inaudible] depositors and for that, uh, we [inaudible] strong solid plan of action [inaudible] [inaudible 00:01:26] certainly before the end of June which is [inaudible] and also will strengthen the financial system. And there will be a need for further action and talks in July uh if there is going to be this first in July. So one of the key aspects of the discussion that we start right now is to uh take the document and, map I- map it… map it into sequence [inaudible] government that [inaudible]

Benoît Cœuré (00:01:56):

Um our last [inaudible] just one last information is uh that we uh [inaudible] ECB this morning even though [inaudible] decision today uh on 85.8 billion euros and 87.8 billion euros uh so potentially an additional two billion euros so potential for a possible [inaudible] which one will be reassessed later tonight or early tomorrow morning depending on the [inaudible] um at the [inaudible] today.

Benoît Cœuré (00:02:57):

The information we have so far is four large [inaudible] as of lunch time, is that [inaudible] there is more muted and [inaudible] and we see a [inaudible] stabilization [inaudible] uh, [inaudible] even the, uh, given the [inaudible] can say [inaudible 00:03:18].

Jeroen Dijsselbloem (00:03:17):

Thank you. Christine?

Christine Lagarde (00:03:17):

Thank you very much.

Jeroen Dijsselbloem (00:03:17):


Christine Lagarde (00:03:25):

Um. I think this document that we have received is actually both um strategic and smart. It’s strategic because it was released, certainly to us at uh half past midnight in version one, at eight am in version two, and ten am in version three. So I don’t know whether version four is coming or whether we’ll have something else to expect but [crosstalk] it’s very strategic. And it’s coming so late, which sadly the way because we could have made much more progress had we had the opportunity and the time to just go through the general proposal.

Christine Lagarde (00:04:03):

It is smart in the way that it seems to use the framework of what we have called repeatedly the aid memoire, which as you will remember is this document which cannot be really shared without issue with some parliament but which is in and of itself uh a diluted version from the aid memoire so this strategic and smart document is moving in that direction, of the aid memoire but is certainly not the aid memoire as it is. Neither from the fiscal standpoint, which is also very smartly addressed, nor in the content, nor in the structural reforms, nor in the smart omissions that [inaudible] here and there put in the document.

Christine Lagarde (00:04:50):

So having been negative, as is quite often expected from the IMF, but honest to what I have had about twenty minutes to go through, I think that they are positive moves in quite a few directions but it lacks specificity, it’s only semi comprehensive, and we need to actually sit down and do some real technical work in order to assess what will be unleashed by the various proposals. We cannot say because there is point zero X of VAT or point zero Y of VAT or because there will be additional contributions to finance the pensions system as is proposed in some instances, it’s going to bridge the gap.

Christine Lagarde (00:05:39):

What I’d do a simple, stupid exercise of comparing what we had in the aid memoire which was one percentage GDP out of pension reform, one percentage of GDP out of VAT reform, and half a percentage of GDP out of subsidies reform. It doesn’t add up for the moment but I don’t want to prejudge because we have not had time to actually do the work that needs to be done.

Christine Lagarde (00:06:04):

The only comment that I would make on the substance is that we find it quite growth unfriendly, which is exactly the opposite direction of what we like to take going forward to make it more growth friendly. Is it going to be 100% growth friendly? Probably not, difficult in the present circumstances but it doesn’t have to be very growth unfriendly in that it focuses on additional contributions on labor where the labor costs edge is already… which is already quite high and I adds to the corporate tax, which as we know is historically difficult to collect, in many countries but in Greece in particular.

Christine Lagarde (00:06:42):

On the structural reforms, uh we are I think a bit short on many points but as I said, don’t want to go into the details of it unless we have the time to do the work and the three institutions can come to a fully… a very common view which is what we, um, intent to work towards. In terms of process, I’m very much looking forward to the teams sitting down, very promptly this afternoon in order to assess and measure the contributions of the proposals, identify the gaps, and see how it can be bridged. I think that needs to be done promptly. I’m not too sure that the next two day will be sufficient but I’m certain that it will not be sufficient to reach, what under IMF jargon we call a staff level agreement, which requires that there be a list of prior action, financing for the next 12 months, assurance of financing going forward, and a debt sustainability analysis which will be a factor of the current debt and possibly debt reparation.

Christine Lagarde (00:07:45):

Having said that, I’m sure that alternative sequences can be envisaged and from our perspective we are very keen to sit down from 3 pm onwards and to hope that there is broad support in Athens for what is clearly a change of approach by the authorities.

Jeroen Dijsselbloem (00:08:05):

Thank you very much. Um, Yanis, we started without you sorry. I wasn’t sure if you were very close or still very far. Someone asked how long it would take you to come by motorbike from Athens but luckily you were quite close. Uh so you’ve only missed a short part of the introduction by the commission um the three institutions have given a very first overview of your new proposal but of course I would like you to introduce them uh more uh and then well, we’ll see where we stand.

Yanis Varoufakis (00:08:42):

Thank you very much, Jeroen. Uh thank you to the institutions. Let me get one thing completely straight in the response to Christine’s uh, comment about uh the smartness of strategic element in the way and the timing of the presentation. Christine, let me assure you that there was no strategic delay involved, the reason why you got it late was because we were working very, very hard.

Yanis Varoufakis (00:09:11):

Colleagues, you have to understand that the kind of compromises that we have affected, that we have introduced to this… in this text are politically extremely difficult. It’s not simply a question of three or four of us sitting around a table and deciding them, uh the reason why there was uh a second version during the night, I was not aware there was a third, but I don’t believe there was a third, there was a second version during the night was because, uh, there was some technical details that had to be corrected. There was no, uh, political change in the middle of the night. Christine, uh you, you you you described the approach that we have taken as ‘smart’ and I suspect what you mean, uh and I think I’m faithful to the spirit in which you said it, is that we we we are trying to fudge, we are trying to stay within the institutions expectations of us but at the same time not to. This is how I understand, uh your, your uh, your point.

Yanis Varoufakis (00:10:13):

Colleagues let me remind you that our guiding principal, and I think we all agree on that is the 20th of February Agreement. And let me remind you that it took three EuroGroups to reach that agreement, and the whole point of that agreement, especially if you read the text of 20th February, was to establish common ground between the existing MOU, the existing program, and the new ideas this government was elected to pursue.

Yanis Varoufakis (00:10:39):

This is precisely what we are doing now. So I believe that the approach we have taken is fully in the spirit of the 20th of February Agreement. We’re trying to find the common ground between a program which um in the um opinion of many, including some within the IMF I believe, has failed to achieve its targets, the targets that were set in 2012, uh there were various uh how shall I say? Um, failures, predicted failures that were involved in that program. There were clearly huge failures on the Greek side, in terms of implementation, in terms of achieving the growth targets that were set, and at the same time we need to stay within the framework but at the same- but bring up to the new set of circumstances and put together a reform package that we can push through the Greek parliament, push through your parliaments, through your governments, and make a success of it.

Yanis Varoufakis (00:11:45):

So it is quite clear, and I welcome the view of the uh, other institutions as well as Christine’s, that this is a framework for reaching an agreement, for founding an agreement on, within it. Uh as you can see, we have made great strides at, uh, um, meeting the institutions all the way, in terms of the fiscal targets. In particular the primary surplus numbers of 1%, 2%, 3% and thereafter 3.5%. We have um put forward parametric measures, more than what was asked by the institutions. The institutions were asking for two and a half percent, we have over parametric measures of 2.8% by 2016. The difference here is that the VAT target that the institutions presented to us of 1%, we do not believe we can extract it parametrically without any improvements in collectibility. We believe that, on the basis of a pretty thorough uh meso-economic, partly micro-economic, partly macro-economic analysis, that the best we can do parametrically is about 0.75% uh of GDP through parametric measures.

Yanis Varoufakis (00:12:59):

Now, there seems to me that there is a small incongruity here on the part of the institutions, in particular of the IMF, the argument that was being put to us as to why we need to simplify the VAT code, um, was that it increases collectibility. But when we agreed on that and we proposed a major simplification of the VAT code, we were asked to produce numbers parametrically, assuming that there is no improvement in collectibility. I just want to mention that as an indication of the, of the differences that still exist. But on the question of pensions, we have produced numbers that credibly promise more than 1%, just slightly, just above 1% of GDP in savings for the pension system. We propose to do it differently, instead of cutting pensions, we are proposing an increase in contributions by both uh, uh I’ll come to this in a minute. On top of that, we have undertaken significant defense cuts, cuts in defenses expenditure. And of course, other administrative measures which are very important, firstly because one of the great problems in Greece, as everybody knows, is the collection of tax is not so much tax rates and parametric values.

Yanis Varoufakis (00:14:19):

On the question of uh, the growth friendliness that Christine mentioned, now this is of course the crucial key. It is a key that will unlock success for this program and for the future arrangements for the Greek economy. The point we wish to make is that we have accepted the fiscal numbers of the institutions fully cognizant of the fact that these numbers are recessionary, when in an economy like the one we have now, which is in recession, has never managed to get out of recession, even in 2014, at least in nominal terms. When you introduce 2.8% of measures this is by definition, not particularly growth friendly. We had to compute to estimate our different multipliers. So for instance, whether it is growth friendly or not, or relatively growth friendly compared to the institutions suggestions depends on whether you think, for instance, that reducing the lowest of the low of pensions has a smaller or larger multiplier effect comparing- compared to increasing corporate tax. But this is, this is an empirical matter and, and we can sit down of course with our technical teams and discuss this, uh this afternoon, until we’re each in agreement.

Yanis Varoufakis (00:15:44):

More precisely on the pensions, because the pensions are very important, I think for all institutions, all three institutions, and for us. Um, we have determined and committed to introduce legislation immediately that dras… drastically limits early retirements beginning 1st of January. This coming January 2016. Uh to push the minimum age of retirement, effective retirement not formal retirement, at 67 by the year 2025. From this year, we’re proposing that anyone who goes on early retirement, using the provisions of existing law which cannot just be cut off from one day to the next, uh there will be a 10% surcharge effectively reduction their pension in the form of a contribution to their own pension fund. That’s on top of the existing 6% so there will be a 16% reduction in the, um, pension that will be receiving… in the take home pension in a sense. The solidarity acas tranche that Pierre mentioned before uh, we’ve agreed to begin replacing it in 2018, and to faze it out completely by 2020. By, within an appropriate framework compensating pensioners below the official poverty line.

Yanis Varoufakis (00:17:08):

Uh at the same time, again in the context of pension reform and, and, and reaching that level of just above 1% of measures benefiting the pension system and its sustainability, we are proposing to increase the health contribution of those on supplementary benefits by 5% from 0%, which is now to 5%. To increase the social security contribution for those who are um not already enjoying a supplementary pension but who are working towards it, to increase it by half a percent of their salary, to harmonize contributions in the private… in the public sector and make them equivalent to those in the private sector that is a significant improvement in the finances of the pension funds, and of course to complete the consolidation of pension funds with an effective and important saving in the operating costs of pension funds by the 31st of September 2016.

Yanis Varoufakis (00:18:09):

Now additionally we have other parametric measures uh that we are proposing as part of this document that was uh related to the institutions overnight, uh for instance I mentioned the defense cuts. We’re talking about immediate defense cuts of 200 million, uh, reforming the income tax code that involves capital taxation investment vehicles, farmers, and the self employed. Um the corporate tax increase from 26% to 29%, a permanent tax regime for advertisements in the media, in particular television that have been scandalously exempt from taxation so far. Um, an increased… a permanent increase in luxury tax on recreational vessels, uh taxation on VLT machines and gaming machines of 30% that was, that was an unregulated part of the market and therefore untaxed.

Yanis Varoufakis (00:19:06):

Uh reforms in pharmaceutical rebates, uh, perhaps far more importantly in the long term. And this is something I’ve mentioned before here but I’d like to mention once again because it is a momentous change in Greece, and it is one that I would like you to… I would like to impress upon you how difficult it was to push through parliament or to imagine pushing it through parliament, we haven’t pushed it yet but we shall. That is the creation of a fully independent tax and customs authority, outside the Ministry of Finance along the lines of something like the IRS in the United States. Uh the fiscal council that will be monitoring the budget, an independent fiscal coun… uh, uh council with a possibility, as I mentioned in our last meeting, of trading off policy space of the Greek government with an automated uh deficit break.

Yanis Varoufakis (00:20:00):

Regarding product market and administrative reforms that Christine mentioned, we have begun and announced formally a joint project with the OECD that will be, um, that is already being implemented and which spell out to the institutions in some detail. Just mention, let me mention the headlines here uh “An Anti-Corruption Drive through-out the Greek Bureaucracy and the Greek procurement mechanisms”, “Liberalization of the Construction Sector” which is an important sector country like this, especially as we are exiting the recession. “The Liberalization of the Wholesale Trade of Electronic Platforms” media as well as communications. Removing the red tape drastically from the licensing of businesses and introducing digitalized ‘one stop shops’. Uh pension system reform that is serious long term actuarial studies in conjunction with the OECD for the purposes of dealing with the problem of the system and ability of the pension system once and for all and not just through parametric measures. Uh, in conjunction with the OECD and the ILO, the design flexible collective bargaining agreement for the labor markets.

Yanis Varoufakis (00:21:17):

In the realm of privatization, we have set out what is a realistic problem. Let me remind you, colleagues, that the last programs of privatization in Greece were scandalously um misjudged and ill designed. Remember the 50 billions that were supposedly to be collected through privatization when 1/50th was achieved in the end. We have set out a very realistic program for this year 1.4 billion, for 2016 3.7 billion, and for 2017 1.2 billion in a market where asset prices have collapsed.

Yanis Varoufakis (00:21:56):

And let me now complete by saying that, colleagues, these of course are critical moments, there is very little time left, and we all have to move. We believe that our government has moved a long way towards a position of the institutions, we have accepted fiscal measures that in an economy which has uh not stopped shrinking with uh no functioning banking system in terms of credit provision with very little investment. In that kind of economy, we have accepted in order to bring about this agreement uh measures that are indeed recessionary. Even under fairly conservative estimates of fiscal multipliers, we’re going to have a significant reduction in aggregate demand.

Yanis Varoufakis (00:22:47):

For this package of reforms, which we have exceeded in order to conclude successfully the final review of at least the European program. Setting for the moment aside for the moment the IMF program which we can discuss later which runs in parallel until March of 2016. For that program to have a chance of success, a chance of being viable, it must come together with investor confidence building announcement regarding financing. And by financing I don’t mean just an extension of the current loans, uh a… a new package of loans which is not sustainable and which adds uh new debt on existing unsustainable debt, I’m referring to an announcement that inspires a high probability estimate in the mind of investors, and citizens, and consumers that Greece is going to be out of the woods soon. That Greece is about to be fully integrated for instance in the ECB’s Quantitative Easing Program, that we’re not merely buying time until a few months later when we come back to this forum and have another discussion about the Greek Crisis. Neither you nor we want to go to our parliaments yet again, after we go now in order to solidify, in order to push through them the agreement that we are discussing today.

Yanis Varoufakis (00:24:04):

This is why we’re very much in favor of completing the review now, completing the second program, uh, and establishing the measures that we are going to agree upon and which we are going to push through parliament as the common conditionality with uh an ease and facility that will allow uh for the transfer… the effective transfer of the 27 billion of the legacy debt from the SNP program into a more manageable debt repayment program so that we can have, on the one hand, our government accepting MOU, a revised MOU, with significant recessionary measures in it but also a flattening out, a smoothening out of the debt repayments to the SNP bonds for the next year, year and a half, two years, which runs against the grain of what we are agreeing to today which is a package of reforms that makes Greece sustainable again.

Yanis Varoufakis (00:25:09):

For as the minimum condition to make this work, both financially in terms of the funding gap, in terms of a modicum of hope that Greece will re… will join Quantitative Easing uh is an SNP buy back to smoothen out the short term repayment schedule and to allow a degree of hope about participating in a program, the QE program, which let’s not forget was created in order to defeat deflation, and this is significant for a country which is in the throngs of deflation, probably the only country in the Eurozone today which is suffering a deflation rate of -2%. Surely I believe the institutions can see that.

Yanis Varoufakis (00:25:53):

I have no doubt because I have heard this, I have discussed this with the good people of the IMF that this um balancing between an MOU that gives you what you need in order to seal the agreement with us and at the same time a minimum approach to the way that the debt must be managed more efficiently in order to make the MOU reforms potentially successful. This balancing act is essential for us in order to be able to seal this agreement and to say that the Euro Group, the uh Euro Summit later today, the Greek government, each one of you taking this… this package to your parliaments, we have signed and sealed a viable agreement for Greece. One that has considerable hope and a high probability of uh ensuring that we’re not back here in a few months time, discussing the same problem again. Thank you very much.

Jeroen Dijsselbloem (00:27:05):

Thank you. Um, colleagues I think that um listening to the institutions. There are two ways to look at where we are, two ways to look at the proposals. [inaudible]

Jeroen Dijsselbloem (00:27:14):

Uh was of course it’s only a first assessment because they came in only this morning, um, but I think Falda said was a good start for discussion, uh, Pierre told about… said it was a comprehensive package but more work needed to be done. Benoit called it the right framework for discussion and had many questions on substance and, uh, specificity, Christine, um, called it, after having said it was strategic and smart, she said there was some positive moves in there but also lacks specificity that doesn’t add up to [inaudible] having said that I think for us the assessment of the institutions is crucial. First thing that would have to happen for us to be able to give our political judgment is to, uh, hear on that more definite assessment by the institutions and that would require still work with the Greek authorities uh which would start immediately today to get the specifics, to get the details, to ask the questions that need to be asked, to understand what the proposals are, and to work on a, in the end, a very concrete, very specific list of prior actions. So we can have the first round of political remarks or values now. Uh, but I think, on the basis of what we’ve heard from the institutions it’s crucial in the coming days, uh, highly concentrated work needs to be done. In order to see whether we can reach that agreement later this week. On the basis of what we have now, it is impossible to come to any final conclusions, that would be my assessment of where we are now. Um, but I’ll open the floor to ministers to hear from your views and political guidance. Wolfgang?

Wolfgang Schäuble (00:29:32):

Thanks Jeroen, I… I can agree with your last remark, because I didn’t see one page, one sentence, [inaudible 00:29:40].

Wolfgang Schäuble (00:29:54):

I can not give you any judgment of what I have been careful listening from three institutions [inaudible] I would like to take [inaudible 00:29:56] remarks. My first remark is, I followed closely what Pierre said, the three institutions have to work together. That’s troubling. First they’ve got to agree with what’s agreed the last couple of days, I have to say there has been talks that happened again and again and again the last couple of weeks, including the last couple of days and even the last couple of hours, I got positive reactions in medias and the commission before as the institutions [inaudible] it’s a little bit uh indifference that [inaudible] the institutions have to closely work together [inaudible] in very [inaudible] and could get any additional relation factors because in the German government those [inaudible] three institutions and not blaming one institution by others is precondition before anything else.

Wolfgang Schäuble (00:31:23):

My second remark is if we didn’t get, until now, any… any [inaudible] institutions to say a prudent or if it’s a good move this time. I found it insufficient, therefore I [inaudible] in the current situation, we can do nothing. It was uh… we did not hear about any preparations for the Euro summit. If I got it right, our meeting has been uh um invited to prepare your summit [inaudible] The European summit has been prepared by the Eurogroup. We have been invited yet I think we are… we have been told we must be in it because the solution of the preparations for the summit, but we will not be ready to deliver any preparation for your summit. And we should state it, no preparation for your summit [inaudible 00:33:04]. In case they wanted to do something and they didn’t.

Wolfgang Schäuble (00:33:04):

I can [inaudible 00:33:04] for [inaudible] whatever will be the consequences and your summit resolved any preparation is um, an interesting thing, acting like this. I would like to ask if I got it right from Yanis that he added in his remarks to uh this wonderful new proposal and uh additional conditionalities that there must be an an an a decision on the, s- SMP SMP, it’s just been, if I’ve got it right, he said to assist together with this uh SMP moving from the ECB to the ESM [inaudible]. That is a conditionality which is not to be even to be discussed.

Wolfgang Schäuble (00:33:27):

[inaudible] clear because we are like, MOU not with additional conditionality [inaudible]. Uh, if you and and make, have in mind what Benoit said in our last meeting, on the [inaudible] when he was asked by Luis, if I got it right, and he makes some remarks and it’s in regards the numbers were [inaudible] I would like to ask is the Greek government ready to implement [inaudible] because I think it’s of the essence and uh I would like to ask the ECB, whether ECB is uh, thinking about but as you can ask [inaudible] additional decision on the ELA.

Jeroen Dijsselbloem (00:34:56):

Thank you. Any other remarks or questions at this point? Michael?

Michael Noonan (00:34:56):

Thank you very much, uh Jeroen. Obviously there has been a move, and a move in the right direction in this [crosstalk] building on the safety of February the 20th and on the development of that in the April aide memoire that doesn’t deliver the terms of the aid memoire but progress has been made. It’s a document which I believe will be built on. That came very late and uh effectively it makes our meeting today redundant, because we are not in a position to prepare for a Euro summit so we are not in a position to carry out our legal obligations in that space or a Eurogroup preparing for a Euro summit. And that, sure what will happen that the informal summit this evening uh[inaudible 00:35:55] we need some space, not a lot of space, but we need at least now until Thursday, so that the institutions can do a full assessment and if possible come up with a set agreement and brief us on it in great detail.

Michael Noonan (00:36:13):

Um, At the conclusion of Yanis’ remarks he referred to SMP and the smoothing out of debt uh, the debt profile and the transfer of liabilities from the Central Bank to the ESM, uh, I wouldn’t have thought that was a runner but uh, I’d like to see the Central Banks assessment of that and uh the views of Klaus Rengling on that as well.

Michael Noonan (00:36:45):

It’s very, very late for making moves and I’m… I’m extremely worried about the ELA situation. I can’t see how ELA can be justified with that much knowledge of daily increases of [crosstalk] we’re very near the tenuous position at this stage, and I agree with Wolfgang. I think capital controls… if the process of negotiation is to continue for some time, I think capital controls will need to be put in place in Greece to provide a safety net. [inaudible]

Michael Noonan (00:37:35):

But, uh, taking it all in all, I hope uh we can move forward towards the solution. Especially the position we were in last week, but uh it’s not a question of time running out uh, I will remind you that time has run out. We need to be direct.

Jeroen Dijsselbloem (00:37:58):

Thank you.

Kian (00:38:07):

First of all, I’m very pleased there… there is some movement. um I cannot rectify much new content in this proposal. Um, there is some changes in the figures [inaudible] but so much in the content of this proposal [crosstalk] and we see it that [inaudible] aid memoire which is a non paper [inaudible] so let me point out the channel, the institutions confer, that it is non-paper, this is why there is the flexibility we decided in February in our statement in the agreement with Greece. If it is in line, that’s probably the base for the discussions which are necessary in the next hour and days. But it if it’s not in line there will be much more than the flexibility that we agreed on February that must be dealt in discussion in between ministers of finance. So I don’t know exactly what is the content of this aid memoire, but the discussions about a non-paper is very difficult for us to make the right decisions.

Jeroen Dijsselbloem (00:39:40):

There are many questions that we raised so [inaudible]

male (00:39:49):

Thanks Jeroen. Uh, I actually have a few questions to ask, rather than statements to make. The only statement I would make is [inaudible] institutions that there is some movement in the right direction but it all depends on how far we go. Uh, let me say for what it’s worth, that this discussion should have taken place much earlier than today and it could have taken place on the basis of more information. I’m referring to [inaudible] uh I have two questions. One question is to the institutions, I understand from your language and the adjectives you used in assessing state, that there are disagreements. So, uh, I wanted to go into the details of the disagreement in this room but of course as long as there is major disagreement among the institutions it’s very difficult, on the basis of that, to provide a political assessment. We must rely on a common view of the institutions, where they stand and whether there is milage to make going forward.

Male (00:41:00):

So, this um, my second point which was… I mean to take up a point which uh here Pierre according to my notes made, and others: the prior action story. Let’s face it. We need to rebuild trust at a minimum level that allows us to move forward, and the extended prior actions are an instrument for more… more confidence. I would urge that these are put forward and met as this is directly, especially to Yanis and the Greek government, we value and need this or because if we don’t have it, let’s not hide ourselves, then really we’re wasting your time. Thank you.

Luis de Guindos (00:41:52):

Thank you, Jeroen. First of all I am also happy that uh we have started to see some movement apparently in the right direction. I share the same view that uh, that uh, that uh, Pierre [Carlo with respect to how we have reached this situation. That we have started to comment and collaborate on potential uh capital controls. Um, well, how much time we have lost and how is it possible that we have reached this situation that we are on the verge of collapse.

Luis de Guindos (00:42:32):

Uh, thirdly…well, we are… I don’t know what I have to tell my boss, you know for the meeting of today. Uh I can tell him that, you know, the institutions have a good impression about the recent proposal but that there is not a concrete uh uh assessment about the real situation. So, you know, immediately he is going to reply why have I been reconvened with the rest of the heads to this meeting?

Luis de Guindos (00:43:07):

Why? And I think that this is a fair question, for, for, for everybody. And my concern is that we have generated expectations, I don’t know if you have seen the reaction of the markets today, the capital markets. But now, now, we, you know, someone is sending the signal that we are on the track. That I think that we are on the right track, a little bit late but apparently we are… we are on the right track. But uh uh uh, I think that we should be careful with creating this kind of expectations, because if there is one thing that should… everybody around this table should be aware is that markets over shoot. So the reactions today might be upset tomorrow in the other way around, and what we are keeping at the end of the day is only one thing: volatility. Volatility in the market place. So it’s something that we have to take into consideration and to bear in mind.

Luis de Guindos (00:44:05):

And finally, as Pier Carlo and others, I would like to ask two questions. The first one is about debt reprofiling. We can call it, you know, semantics is very ample. But I would like to know, you know the proposals, are we thinking about any sort of restructuring of the debt? Is there any proposal in that direction? And the second one, also for this [inaudible] is, taking into consideration that this is a first assessment, uh, does the implementation of the last version of uh you know the last proposal of the requirement imply any sort of additional funding? And I would like to have just, you know, a general impression of that. Will it require additional finance from the ESM or whatever uh if uh you know, supposing and accepting that the new [inaudible] implements all the measures uh that uh you know this plan the full implementation of this plan will imply any additional funding for the Greek authorities?

Jeroen Dijsselbloem (00:45:29):

Okay, thank you. Um, perhaps we can first… Ah, Michel. If anyone else wants to the floor, please let me know.

Jeroen Dijsselbloem (00:47:28):


[Michel in French 45:45 – 49:20]

Jeroen Dijsselbloem (00:48:33):

Thank you and [inaudible] questions have been raised for the [inaudible] as far as we can and today. Yanis.

Yanis Varoufakis (00:49:35):

Thank you very much Jeroen. Colleague we’re working through the night and during the day towards a good agreement. We have a duty to complete it quickly. Today’s an important day. The Euro summit is going to prove crucial in creating the mood for establishing the framework within which we are going to, be able to do the technical work, speed it up towards this goal, this collective goal.

Yanis Varoufakis (00:50:06):

I was asked by Wolfgang a very straightforward question and I need to give… the duty to give a straightforward answer. You asked me, Wolfgang, whether the Greek government is ready and willing to impose capital controls. Our view, let me make this crystal clear, is that there is no need whatsoever for capital controls as long as we are successful in bringing about this agreement. The Greek public has shown immense calmness despite being bombarded both by the Greek media, by the foreign media, by us politicians with a great deal of insecurity and a great deal of almost terrorizing news regarding bank closures, capital controls, and so on.

Yanis Varoufakis (00:50:53):

The moment we, the politicians, the technocrats, our leaders announce that an agreement has been stuck, there will be no need for capital controls. But beyond that, let me remind you that Greece is not an Island with a single airport without common borders, with the rest of the European continent, capital controls will be almost impossible to implement properly. Uh, and going down that road is going to unleash forces, which I do not believe that any one of us can be confident that we can control. On the question that… another question that was asked about the midterm financing effectively: this is a very serious, uh, reform agenda, that we’re discussing, this MOU that we have, uh, renegotiating and hopefully we shall conclude either today or tomorrow or maybe as Michael said by Wednesday or Thursday.

Yanis Varoufakis (00:51:51):

Um, is a very difficult package for us politically and I have no doubt that it’s a very difficult package for you to, all of us will have difficulty pushing it through a parliament.

Yanis Varoufakis (00:52:01):

It should end the crisis. It should be the last time you have to do this and we have to do this. But in order to be able to do this, we need to look at the repayment schedule, which is, this was designed, let me remind you a long, long time ago before the uh, fiscal numbers and the growth numbers were derailed after 2012 the proposal that we’re putting forward is really very simple. Once we are happy with the conditionalities, once we agree on the conditionalities, once we have a time table for prior actions as uh Pierre Carlos said we should embed this within a framework that makes sense and gives it the air of a sound public finance, which is necessary in which not to suffocate. So the point here is very simple. Let me just describe it once more but very succinctly. The idea is that we have these 27 billion sitting on the books of the ECB which are preventing us from returning to the markets.

Yanis Varoufakis (00:53:10):

Market access is what we promise at the end of every agreement. Without QE, Greece will find it very difficult, it will be actually a cruel irony if the only country that needs it so badly is the one that is excluded from it. The only way we can do this is by without going to our parliament again in a few months time or in a year’s time.

Yanis Varoufakis (00:53:30):

And meanwhile losing this opportunity of taking ad- advantage of a program which will not last forever if we don’t jump on the bandwagon of QE, now we are going to, to, to, to miss out on this. So the proposal is this. The MOU that we are negotiating should be of course the basis for completing the current review, the fifth review, and at the same time that completes the European program.

Yanis Varoufakis (00:53:59):

We have a new agreement with loan arrangement with the ESM using the same conditionality, not one new Euro for the Greek government in terms of spending of using, the new ESM agreement or the same conditions allows us to do to perform an SMP by back from the ECB, retire those bonds, the SMP profits, which will be something like around nine billion can be dispersed in doses with reviews every time that so that the implementation of the MOU is monitored properly and on top of that we can have an agreement as part of this same arrangement that Greece’s participation in QE, which will have been made possible by this agreement is also conditional on the reviews of a regulatory views of the implementation of the MOU.

Yanis Varoufakis (00:54:59):

Colleagues. The only reason why I’m tiring you this is because we need to answer the question, how do we make this MOU that we’re describing the set of conditionalities not only politically feasible, but also how can we create a space in the midterm for public financial intervention that can make it breathe work so that this Euro Group is not saddled yet again in a few months time with more crunch meetings like this one.

Jeroen Dijsselbloem (00:55:27):

Thank you. I will turn to Pierre.

Pierre Moscovici (55:37):

[French, inaudible, 55:37 – 57:40]

Speaker 10 (00:55:27):


Jeroen Dijsselbloem (00:57:37):

[inaudible] participate or?

Wolfgang Schäuble (00:57:37):


Wolfgang Schäuble (00:57:37):

Not, necessarily, only if you, want to participate.

Group (00:57:37):


Wolfgang Schäuble (00:57:45):

Pierre [inaudible] not answer all of my questions because, I got that there have been positive comments on commission before other institutes [inaudible] and that seems to me a little bit annoying, having in mind that there is lots of [inaudible] it seems we are not [crosstalk] the if you could do any game to blame the IMF. Without the full involvement of the IMF there will, be no decision. I no way. And I know since it’s an ongoing stories since months, days, and I have to tell you very clear, very [inaudible] the last couple of days where is [inaudible]

Wolfgang Schäuble (00:58:43):

[foreign language 00:58:43]

Benoît Cœuré (00:58:46):

As a matter of fact I thought that I would [inaudible] and certainly make clear. I t was never, never in the mind of commission, at any stage [inaudible] to act [inaudible] it was never, never in the mind, of commission to blame the IMF and if you remember last week, here in the [inaudible] I said that what’s looming for us [inaudible] and so maybe we had to, act faster [inaudible] but we worked together [inaudible]

Jeroen Dijsselbloem (00:59:33):

[inaudible] Mario. Maybe little difficult, for Mario to step in, but if he feels he’s ready…

Mario Draghi (00:59:41):

[inaudible] briefly, quickly on the, on the uh discussion. One general point is the following, this was supposed to be a private, confidential gathering,] then we… there is a story that we’re being taped. Uh and then second probably even more seriously a sentence that was pronounced during the last Eurogroup meeting was reported to the newspapers.

Mario Draghi (01:00:09):

[inaudible] for the wires. And uh, the consequences are making our lives more difficult, not less difficult. So it’s actually a self destructive, a self destructive episode which I don’t think should be repeated, and certainly works against the, possibility of having a candid discussion. Uh having said that, I understand, there is an interest about knowing how long we’ll be providing ELA [inaudible]

Mario Draghi (01:00:36):

Was this a question?

Wolfgang Schäuble (01:01:02):


Yanis Varoufakis (01:01:02):


Wolfgang Schäuble (01:01:03):

Yeah. The question is do we need counter proposals [inaudible 01:01:03]?

Mario Draghi (01:01:03):

Need [inaudible 01:01:03]. Okay, okay.

Speaker 10 (01:01:03):


Group: (01:01:03):


Mario Draghi (01:01:03):


Wolfgang Schäuble (01:01:03):

They representing. If I make on defense [crosstalk]

Mario Draghi (01:01:03):

Let me finish. The [inaudible] through the second point.

Mario Draghi (01:01:03):

No, I appreciate this interest [crosstalk]

male (01:01:03):

Press the button.

Mario Draghi (01:01:03):

I was very [crosstalk] yeah?

Mario Draghi (01:01:12):

Yes. I appreciate the interest, in knowing, uh, how long [inaudible] we continue providing the ELA it’s obviously an important point in, the uh overall policy discussion, but I think you will want to appreciate, that our independence work in all directions.

Mario Draghi (01:01:25):

So, as I am asking you questions about your fiscal policy although I do have to refrain myself from doing it from time to time.

Group (01:01:30):


Mario Draghi (01:01:41):

And uh, then I will expect to see the same restraint from your side. So, [inaudible] says [inaudible] will be, we had done it this morning, we’ll do it later as well, now we are in this situation or more than that frankly don’t, don’t say and can’t say. Thank you.

Jeroen Dijsselbloem (01:01:58):

Uh, thank you. Klaus. The question was also asked [inaudible 01:02:03].

Klaus Regling (01:02:02):

Yes, I think, Michael asked for the uh, whether the proposal from Yanis is doable and the answer is no. Uh, the ESM has no instrument to take over, um, assets, which guarantees ECB [inaudible] or [Yanis: I didn’t suggest that] cancel or buy out that’s not feasible, we don’t have an instrument. Um, the instrument that, could be used is normal loan to the Greek government with, conditionality, as described to the ESM treaty [inaudible] money of course to use, to um, to give to the ECB. Also one more warning:

Klaus Regling (01:02:39):

Cannot do 27 Billion within one months, the ESM, is a very successful issuer on the market as you know, the top is out there [inaudible 01:02:48] annual meeting on Thursday, but there are limits of what we can do in a short period of time. So it would have to spread out [crosstalk] but it can only be done [inaudible] if the context of the [inaudible] of a program.

Yanis Varoufakis (01:03:02):

[foreign language 01:03:02] just one second.

Klaus Regling (01:03:05):


Yanis Varoufakis (01:03:06):

Very briefly uh Klaus, I think there’s a misunderstanding. I never proposed a swap. What I proposed was exactly what you said: that the same conditionalities to be used for a new loan arrangement so that the Greek government borrows that money from the ESM, uses it to buy back the SMP bonds to retire them and therefore the liability is effectively transferred from the ECB to the ESM. It will be a new program, it will be a new loan according to the constitution to the charter of ESM, but there will be the same conditionality that we are agreeing upon these days.

Jeroen Dijsselbloem (01:03:54):

And this [inaudible]

Christine Lagarde (01:03:58):

Thank you very much. [inaudible] and uh, I just want to mention one thing, looking at the immediate future. The IMF is certainly determined to do everything and [inaudible] the other two institutions which,

Christine Lagarde (01:04:17):

clearly is most helpful way forward in view of the urgency, of the market [inaudible] Second point, I want to answer a couple of questions that have been raised because I don’t want to mislead members of the Euro Group and I want them to understand, what what and why we’re doing certain things.

Christine Lagarde (01:04:40):

The famous aide memoir has been put together by the three institutions and certainly constitutes a dilution or watering down, a loosening of what was in the memorandum. And that is not very unusual given the way we have to operate. When we do a review of the program, and the situation have changed, the perspectives have changed,

Christine Lagarde (01:05:13):

the team is different. You might have to adapt to the new reality and integrate this new universe into the program. That’s what we do on most, reviews that we conduct.

Christine Lagarde (01:05:29):

So under the circumstances it’s completely clear that in order to make progress towards one day, satisfactory review, we have to adjust. So that’s what it is, it’s watered down, it’s diluted, it was sens- sensible to actually do that because of that new reality.

Christine Lagarde (01:05:49):

And it does include hard, difficult steps, significant structural reforms. Not all of them, but adjustments to the reality, which is the reason why in the area of financing, which for the IMF has to be very clear and specific for the next 12 months.

Christine Lagarde (01:06:11):

More will be needed, and we’ll probably include some debt re-profiling, which, if we stick with the, me- with the aide memore as it is, we’ll not require haircuts.

Christine Lagarde (01:06:23):

So, I’m completely open and transparent with you as to what steps we have to take. In case of change of circumstance. That’s what it is.

Yanis Varoufakis (01:06:35):

But that’s what they proposed. No haircuts.

Jeroen Dijsselbloem (01:06:42):

Thank you. I’m going to try and uh, come to conclusions. Now first conclusion, would that there can be no, conclusion, on the basis of the information that we have been given today.

Jeroen Dijsselbloem (01:06:55):

Um, you must realize that’s the fact that there is a summit tonight and it’s a decision that was supposed to be taken elsewhere. Uh, but if there is a summit, then we must prepare it. We have to try to do so today, but given the information we have now and the, late added proposals and the work the institutions still have to do on that,

Jeroen Dijsselbloem (01:07:18):

It’s impossible to have a final [inaudible] to our bosses as [inaudible 01:07:27]. Having said that, that is also an advice to the, uh to the summit tonight that’s where we stand now, it will be impossible to come to an agreement today.

Jeroen Dijsselbloem (01:07:40):

Second point would be that many of you have said, I would like to analyze that. We do welcome the new proposals. We feel that it is a possible step in the right direction. I think those are the words many of you have used.

Jeroen Dijsselbloem (01:07:53):

Yet. The proposals will have to be assessed very specifically. If there are any gaps they must be filled. Uh, and it will have to be translated in a very concrete prior action list which can be delivered in a very short period. That prior action list is also a chance to fill in any gaps to make concrete [inaudible] and to deliver specifics where needed.

Jeroen Dijsselbloem (01:08:22):

That work and so I’ve also understood from the institutions, can start immediately and also Yanis refer to that [inaudible] to work closely together. If that [inaudible] certain enrollments and [inaudible] from that.

Jeroen Dijsselbloem (01:08:40):

And we welcome that, thank them for all their efforts. That work can start immediately with a view to reach if possible a final agreement, likely this week. It also means in my mind will get such results is successful,.

Jeroen Dijsselbloem (01:08:59):

Is possible that we will have extra Eurogroup before council’s meeting. Two other points: first, some of you have asked the financing needs, and others have mentioned debt. Financing needs, and I think we will have to come back to that later this week, depends of course, on how tough and concrete the final deal is.

Jeroen Dijsselbloem (01:09:23):

Uh, so we will also have to ask the institutions to come back on that issue to us, if we have an extra Eurogroup this week. On debt: if the Greek government puts that forward, as pre-condition, having deep dept reconstructuring and haircut [Yanis: I didn’t] I think that will blow, to be quite frank [Yanis: I didn’t].

Jeroen Dijsselbloem (01:09:48):

We’ve discussed this may times in the Euro Group I know the [inaudible] of this issue, [crosstalk] [crosstalk]

Jeroen Dijsselbloem (01:09:52):

And is, and has always been along the lines, of this [inaudible 01:09:57] statement of 2012. And that statement said that, the full, implement, first of all, Greek government [inaudible] in other words that’s the [inaudible] and the program has been on track for almost a year now and uh it’s not complete.

Jeroen Dijsselbloem (01:10:14):

Secondly, uh the second element in our stage [inaudible] November 2012 was [inaudible] if necessary, in other words, if necessary, we would look again. We would consider, that’s the third element, to look at uh, measures, [inaudible] uh. And that promise from November, 2012 was quite clear.

Jeroen Dijsselbloem (01:10:37):

I don’t see a lot of political space to change that way. Arguing and making moves now or promises now in terms of debt reprofiling or debt restructuring at this point would certainly make a deal impossible. That’s my political assessments.

Jeroen Dijsselbloem (01:10:56):

Of course the leaders may feel different though I don’t think so.

Wolfgang Schäuble (01:10:58):

Mm-hmm [affirmative]

Jeroen Dijsselbloem (01:10:58):

Uh, having said that, we will also come back to this discussion.

Jeroen Dijsselbloem (01:11:05):

If there is a, phases for uh, agreement in the Euro Group, later this week. In terms of communication I will, uh. Lets first first check if we agree so far.

Jeroen Dijsselbloem (01:11:20):

If that’s the case, then I think in terms of communication, of course, everyone will [inaudible] I will say, that we welcome the new proposal by the Greek government.

Jeroen Dijsselbloem (01:11:33):

That they have not yet been assessed. They will have to be assessed by the institutions who will jointly, be [inaudible] with the Greek authorities to go through proposals, to see whether that can be, later this week, put into a list of prior actions, which is [inaudible] so [inaudible 01:12:00]-

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