Dutch embassy counselor: No support for 4th bailout; Greek success an argument against Euro-sceptics

Debt: A «window» for medium-term measures after 2018
Thursday, 03 November 2016 10:29

By Vassilis Kostoulas

There’s no political support for a fourth bailout by European institutions to Greece, the financial-economic counselor at the embassy of the Netherlands in Athens told “N” this week.

Moreover, Siwarde J. Sap offered clarifications over a mini-furor that emerged in Athens this week concerning a document sent to the Dutch Parliament in July by Eurogroup chairman and Dutch FinMin Jeroen Dijsselbloem, one regarding the second review of the ongoing Greek bailout program. The Dutch diplomat said the document does not refer to more social security reforms in Greece, and that Dijsselbloem did not use the word “pensions”.

She nevertheless said resources must be found for the Greek government’s initiative to implement a minimum guaranteed income in the country.

the financial-economic counselor at the embassy of the Netherlands in Athens, Siwarde J. Sap.

Sap said any decisions for Greek debt relief must comply with the May 2016 agreement, leaving open the possibility, however, for medium-term measures, but only after 2018. Even in that case, she adds, debt relief would be in store if negative results were confirmed, such as a failure to meet growth targets.

In any case, Sap underlined the necessity for the current adjustment program to succeed, something she said would also serve as an argument against her own country’s Euro-skeptics.

Turning back to the Greek political reality, she expressed a view that “a government with leftist ideas should not avoid boosting competitiveness”.

Finally, in turning to another complex problem plaguing Greece and Europe, she said “the Netherlands, just as in the refugee issue, has assumed its share (of the burden), so that the EU can fulfil all that it has promised Greece, in terms of financial and other terms.”  

Interview with Siwarde J. Sap, the financial-economic counselor at the embassy of the Netherlands in Athens.

What is your assessment over the course of the economic adjustment in Greece? A series of analyses claim that a fourth bailout program is inevitable. What is your opinion?

Greece is making progress in adopting the necessary reforms. It is important to not only adopt these reforms, but also truly implement them in practice, through secondary legislation and other measures. By adopting and implementing all necessary reforms, the current program should be sufficient. I personally see no political support available for a next program among creditors, for example in the Dutch parliament. Let us focus on making the current program successful. I hope Greece will be able to conclude its second review, currently underway, in a timely and constructive manner.

Does Eurogroup chairman Jeroen Dijsselbloem want to reopen the issue of pension reform in Greece?

No, this is not correct. In fact he did not even use the word ‘pensions’. In his regular letter to the Dutch parliament on the agenda of the upcoming Eurogroup, he mentions the labor market and measures regarding social security as topics of the second review. The term ‘social security’ refers to the guaranteed minimum income. Various media wrongly translated this into ‘pensions’. The Greek government of course still needs to identify resources in the state budget to finance the guaranteed minimum income.   

The Greek government is staking a great deal for a timely  solution for long-term measures regarding the Greek debt. Based on the "fermentation" processes in progress, do you estimate that a relative decision is possible before the program's completion in 2018?

Last May, the Eurogroup agreed on a package of debt measures. This package is the basis of any future decision on the Greek debt. The package is conditional on compliance with the program requirements and is aimed at ensuring that yearly gross financing needs remain at a level that is manageable for Greece, that is 15% in the medium term.

Short term measures include smoothing the repayment profile of EFSF-loans and reducing interest rate risk. They will have a positive impact on Greece’s debt sustainability. Further measures by the Eurogroup will always be taken within the context of last May’s outcome and are expected to kick-in following the successful implementation of the program in 2018. They will be implemented if an update of the debt sustainability analysis shows they are necessary to ensure that gross financing needs remain at a sustainable level. These possible medium-term measures include the restoration of the transfer of central bank profits on Greek bonds to Greece and re-profiling of EFSF-loans.

Given the uncertainty in long-term macro-economic forecasts, in the long term, after the program, the Eurogroup would consider activating a contingency mechanism on debt provided measures are needed to meet the financing needs benchmark and subject to compliance with the Stability and Growth Pact. This will ensure the sustainability of Greek debt in case an adverse scenario materializes, for example lower growth than expected.

Do not forget that most of the reforms that we ask from Greece are reforms that Greece would anyway have to adopt to stay competitive in Europe and the world, with or without our involvement. For Greece’s economy, competitiveness is key. I believe a government with left-wing ideas should not shy away from improving competitiveness.

What about the IMF’s involvement and Greek participation in the ECB’s QE?

As the Eurogroup chairman and Dutch finance minister Jeroen Dijsselbloem hopes to keep the IMF on board regarding Greece, I expect to see decision-making by the IMF following the Eurogroup of December 5 and the IMF’s subsequent Debt Sustainability Analysis (DSA). The ECB will make its own DSA and decide on Greece’s participation in its Quantitative Easing program based on that.

The rise of euro-skepticism is exerting pressure on European leaderships to make changes in the mainstream policies of the EU. Would you suggest that this also concerns the management of the Greek case?

In the Netherlands, one of the major arguments of euro-skeptics against the EU is that not all member states keep their promises and many declared EU commitments are not followed up. By doing what it has agreed upon, Greece can help to contradict that argument. Meanwhile, the Netherlands does its share to keep the EU’s promises towards Greece, on financial-economic and other matters.

How is Greece handling the refugee and migrant issue? In your opinion, how solid is the EU-Turkey agreement?

The EU-Turkey agreement is functioning. It has played a major role in helping to bring the migration crisis under control. The numbers of migrants flowing into Greece has been brought down significantly. We all have to work towards its full implementation. This remains a challenge, including for Greece, which is expected to send back more irregular migrants to Turkey.

Meanwhile, I believe my country is doing its share. We have provided border police officers, patrol boats, interpreters, screeners and asylum case workers to reinforce the Greek authorities via the EU’s agencies, especially on the island of Chios. We also provided humanitarian aid to refugees stranded in Greece. We are relocating about 100 refugees per month from Greece to the Netherlands to lighten the burden for Greece.  Moreover, a Dutch naval frigate is currently acting as the flagship for the NATO fleet which is sailing in the Aegean Sea. As in matters regarding the Eurozone: a lot remains to be done, and we should all do our share. We believe we do.