All sides expect and are working toward an overarching agreement on debt relief and Greece's exit from the programme when the Eurogroup meets next week, on June 21, European Commission Vice President Valdis Dombrovskis said on Thursday, as he emerged from a meeting with Prime Minister Alexis Tsipras in Athens.
"Those negotiations are still ongoing but I would say that the attitude from all sides is constructive, so we hope that we will be ready to reach this agreement in next week’s Eurogroup," Dombrovskis said.
He reported a "very good meeting" with the Greek prime minister, covering a range of issues, especially focusing on the completion of the Greek programme that was due to end in August. He noted that this overarching agreement will have several elements, including that of deciding on the measures that will reduce Greece's debt servicing costs:
"First of all, there is a precondition, if you want, which is a completion of the fourth review and completion of the prior actions, which the Greek parliament is voting today. Second, there is agreement on debt measures and what can be done and, on the European Commission’s side, we are emphasising the need to have frontloaded measures to ensure that Greece can credibly return to the markets," he said.
"Then, of course, there are discussions on post-programme arrangements, where it is important that Greece sticks with the implemented reforms and sticks with the post-programme fiscal trajectory," Dombrovskis added.
He noted that, in the medium-term, Greece will have to aim for a 3.5 pct of GDP primary surplus until 2022 and that this could then gradually decrease, "to at least 2 pct of GDP". Some of these medium-term debt relief measures, he added, will be linked to adherence to the post-programme fiscal trajectory.
Replying to questions, Dombrovskis said that the Greek economy is finally recovering.
"It was back to real economic growth last year so this year we expect that economic growth will be around 2 pct and we must see how we can further support this growth. As you remember, in 2015 the European Commission came with the initiative New Start for Growth and Jobs in Greece, substantially improving conditions for Greece in terms of available EU funds and also providing lots of technical assistance to improve absorption. Of the 35 billion euros that were mobilised in this way, Greece has already used 16 billion and, in a couple of years time, Greece has moved from one of the worst absorption rates of EU funds to one of the best absorption rates of EU funds," he said.
More positive news for the country, he noted, included a substantially increased cohesion envelope.
"All in all, as you know, cohesion will face 10 pct cuts in real terms; at the same time Greece will get an 8 pct increase in real terms. It still needs to be negotiated but that is the proposal the European Commission has put on the table. So, indeed, we see now that with lots of very important reforms implemented, with Greece’s support for investment...Greece’s economy has good potential for economic recovery," Dombrovskis said.