New bailout for Greece approved and launched

The Eurogroup met on August 14 and agreed on a new ESM macroeconomic adjustment programme for Greece, signalling the end of negotiations.

By Christopher Ball

21 Aug 2015

The programme paves the way for mobilising up to €86 billion in financial assistance to Greece over three years (2015-2018). The agreement is reliant upon the Greek implementation of numerous policy measures including: medium-term target for a primary surplus of 3.5% of GDP by 2018 to be achieved through fiscal reform; an ambitious reform of the pension system; key labour and product market reforms to open up the economy to investment and competition; a commitment to engage in privatisation.

The deal was followed by an official decision of the European Stability Mechanism to approve the Financial Assistance Facility Agreement (FFA) with Greece on August 19th. This itself was accompanied by the release of the tranche of financial assistance for Greece of €26 billion.


The European Commission was keen to stress that the “disbursement of funds is linked to progress in delivery of policy conditions, in accordance with the MoU. These policy conditions are intended to enable the Greek economy to return to a sustainable growth path based on sound public finances, enhanced competitiveness, high employment and financial stability”.

Speaking about the agreements, Commissioner Pierre Moscovici, said: "The conclusion of this programme is great news for Greece and the European Union as a whole, creating conditions for more growth, stability, investments and jobs. Combining solidarity and responsibility, Greece, the other euro area members and the Institutions open a new chapter, based on reforms, fairness and shared trust."

Given the large degree of criticism regarding the social impact of the previous programmes from the Greek government, the Commission has used the announcement of the agreement to argue that there is a large degree of attention paid to social fairness in the new programme. 

The Commission has found that “if implemented fully and timely, the measures foreseen in the programme will help Greece return to stability and growth in a financially and socially sustainable way, and will contribute to meet the most pressing social needs and challenges in Greece.” The social measures that are stressed include: 

  • phasing in a guaranteed minimum income scheme and providing universal health care,
  • challenging vested interests, such as phasing out favourable tax treatments for
    ship-owners or farmers,
  • supporting the role of the social partners and the modernisation of the collective bargaining system,
  • fighting corruption, tax evasion and undeclared work,
  • supporting a more transparent and efficient public administration, including through moving towards a more independent tax administration, the reorganisation of ministries and the introduction of a better link between salaries and job responsibilities.

The deal, which was officially approved by the Greek Parliament on August 17th has now also passed the hurdles of approval by the sceptical German and Dutch national Parliaments. Head of the Eurogroup, Jeroen Dijsselbloem, argued that the ESM agreement “provides perspective for the Greek economy and a basis for sustainable growth. The Greek government is bound to implementing this wide-ranging reform package with determination and we will monitor the process closely. I’ve said before it's not going to be easy. We are certain to encounter problems in the coming years but I trust we will be able to tackle them.”


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