#Greece: Eurogroup reject Tsipras plans

Last week (8 December), Greek Prime Minister Tsipras (pictured) made a proposal to spend €617 million on support for low-income pensioners and VAT relief for those struggling with the refugee crisis on the Aegean islands. Eurogroup has rejected the proposal, writes Catherine Feore.

Greece is on its way to exceeding its 2016 primary surplus; Tsipras proposed using this leeway to fund his proposals. However, the Greek programme with the institutions also stipulates that all spending – including how to handle over-performance – are matters to be discussed with the Commission in advance.

The Eurogroup countries had reached a qualified agreement to offer Greece very limited short-term debt relief (5 December). The spokesperson for the Eurogroup president, Dutch Finance Minister Jeroen Dijsselbloem, made a statement yesterday (14 December) stating that the institutions have concluded that Tsipras’s proposed actions are not in line with their agreements.

Statement on #greece pic.twitter.com/7kmVmf0eQJ

— Michel Reijns (@MichelReijns) December 14, 2016

An IMF blog posted on 12 December, written by Maurice Obstfeld, the IMF’s chief economic counsellor and director of research and Poul Thomsen, the director of the IMF’s European Department, was already openly critical of the agreement reached on debt relief, saying that "it was simply not credible" to insist on open-ended long-term commitments to very high surpluses. They also said that further spending cuts would be damaging to any nascent recovery in the Greek economy.

If we can rely on precedent this means that the Greek Prime Minister will almost certainly have to withdraw his proposal.

Share this article: