Yanis Varoufakis: Notes on the Euro Summit Agreement

July 15th, 2015
in econ_news

Econintersect:  Former Greek finance minister Yanis Varoufakis has annotated a copy of the 12 July 2015 document issued from Brussels.  Mr. Varoufakis calls the document the "Terms of Greece's Surrender".  The annotated copy can be viewed on his website (link below),  We have created a tabular presentation of the official document along side the Varoufakis notes (see below).

Varoufakis.reuters.380x200

Follow up:

 

Euro-Summit Statement 12 July 2015

Yanis Varoufakis Annotations

The Euro Summit stresses the crucial need to rebuild trust with the Greek authorities as a prerequisite for a possible future agreement on a new ESM programme. In this context, the ownership by the Greek authorities is key, and successful implementation should follow policy commitments. A euro area Member State requesting financial assistance from the ESM is expected to address, wherever possible, a similar request to the IMF1 . This is a precondition for the Eurogroup to agree on a new ESM programme. Therefore Greece will request continued IMF support (monitoring and financing) from March 2016.
  • rebuild trust:  i.e. the Greek government must introduce new stringent austerity directed at the weakest Greeks that have already suffered grossly
  • new ESM programme: i.e. for a new extend-and-pretend loan; ownership: i.e. the Syriza government must sign a declaration of having defected to the troika’s ‘logic’
  • request continued IMF support:  i.e. Berlin continues to believe that the Commission cannot be trusted to ‘police’ Europe’s own ‘bailout’ programs
Given the need to rebuild trust with Greece, the Euro Summit welcomes the commitments of the Greek authorities to legislate without delay a first set of measures. These measures, taken in full prior agreement with the Institutions, will include:
  • a first set of measures: i.e. Greece must subject itself to fiscal waterboarding, even before any financing is offered

By 15 July

  • the streamlining of the VAT system [i.e. making it more regressive, through rate rises that encourage more VAT evasion]and the broadening of the tax base to increase revenue.
  • upfront measures to improve long-term sustainability of the pension system as part of a comprehensive pension reform programme.
  • the safeguarding of the full legal independence of ELSTAT
  • full implementation of the relevant provisions of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, in particular by making the Fiscal Council operational before finalizing the MoU and introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the Fiscal Council and subject to prior approval of the Institutions
  • streamlining of the VAT system:  i.e. dealing a major blow at the only Greek growth industry – tourism
  • improve long-term sustainability of the pension system:  i.e. reducing the lowest of the low of pensions, while ignoring that the depletion of pension funds’ capital due to the 2012 troika-designed PSI and the ill effects of low employment & undeclared paid labour
  • full legal independence of ELSTAT: i.e. the troika demands complete control of the way Greece’s budget balance is computed, with a view to controlling fully the magnitude of austerity it imposes on the government.
  • making the Fiscal Council operational before finalizing the MoU and introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets:  i.e. the Greek government, which knows that the imposed fiscal targets will never be achieved under the imposed austerity, must commit to further, automated austerity as a result of the troika’s newest failures.

By 22 July

  • the adoption of the Code of Civil Procedure, which is a major overhaul of procedures and arrangements for the civil justice system and can significantly accelerate the judicial process and reduce costs
  • the transposition of the BRRD with support from the European Commission.
  • i.e. foreclosures, evictions and liquidation of thousands of homes and businesses who are not in a position to keep up with their mortgages/loans.
Immediately, and only subsequent to legal implementation of the first four above-mentioned measures as well as endorsement of all the commitments included in this document by the Greek Parliament, verified by the Institutions and the Eurogroup, may a decision to mandate the Institutions to negotiate a Memorandum of Understanding (MoU) be taken.
  • i.e. The Syriza government must be humiliated to the extent that it is asked to impose harsh austerity upon itself as a first step towards requesting another toxic bailout loan, of the sort that Syriza became internationally famous for opposing.
This decision would be taken subject to national procedures having been completed and if the preconditions of Article 13 of the ESM Treaty are met on the basis of the assessment referred to in Article 13.1. In order to form the basis for a successful conclusion of the MoU, the Greek offer of reform measures needs to be seriously strengthened to take into account the strongly deteriorated economic and fiscal position of the country during the last year.
  • i.e. The Syriza government must accept the lie that it, and not the asphyxiation tactics of the creditors, caused the sharp economic deterioration of the past six months – the victim is being asked to take the blame by the on behalf of the villain.
The Greek government needs to formally commit to strengthening their proposals in a number of areas identified by the Institutions, with a satisfactory clear timetable for legislation and implementation, including structural benchmarks, milestones and quantitative benchmarks, to have clarity on the direction of policies over the medium-run. They notably need, in agreement with the Institutions, to:
  • i.e. to make them more regressive and more inhuman
: • carry out ambitious pension reforms and specify policies to fully compensate for the fiscal impact of the Constitutional Court ruling on the 2012 pension reform and to implement the zero deficit clause or mutually agreeable alternative measures by October 2015;

• adopt more ambitious product market reforms with a clear timetable for implementation of all OECD toolkit I recommendations, including Sunday trade, sales periods, pharmacy ownership, milk and bakeries, except over-the-counter pharmaceutical products, which will be implemented in a next step, as well as for the opening of macro-critical closed professions (e.g. ferry transportation). On the follow-up of the OECD toolkit-II, manufacturing needs to be included in the prior action;

• on energy markets, proceed with the privatisation of the electricity transmission network operator (ADMIE), unless replacement measures can be found that have equivalent effect on competition, as agreed by the Institutions;

• on labour markets, undertake rigorous reviews and modernisation of collective bargaining, industrial action and, in line with the relevant EU directive and best practice, collective dismissals, along the timetable and the approach agreed with the Institutions. On the basis of these reviews, labour market policies should be aligned with international and European best practices, and should not involve a return to past policy settings which are not compatible with the goals of promoting sustainable and inclusive growth.
  • i.e. cancel the court's decision in favor of pensioners; i,e cut by 85% the secondary pensions that the Syriza government fought tooth and nail to preserve over the past five months;  and i.e. find 'equivalent victims.
  • i.e. the recommendations that the OECD has now renounced after having redesigned these reforms in collaboration with the Syriza government.
  • i.e. ADMIE will be sold offto specific foreign vested interests at the behest of the Institutions.
  • i.e. to make sure that no collective bargaining is allowed; i.e. industrial action must be banned; i.e. collective dismissals should be allowed at the employers' whim; i.e. the Troika decides (timetables and approach); and i.e. there should be no mechanisms that waged labor can use to extract better conditions from employers.
• adopt the necessary steps to strengthen the financial sector, including decisive action on non-performing loans and measures to strengthen governance of the HFSF and the banks, in particular by eliminating any possibility for political interference especially in appointment processes.

• to develop a significantly scaled up privatisation programme with improved governance; valuable Greek assets will be transferred to an independent fund that will monetize the assets through privatisations and other means. The monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and the remaining 50 % will be used for investments. This fund would be established in Greece and be managed by the Greek authorities under the supervision of the relevant European Institutions. In agreement with Institutions and building on best international practices, a legislative framework should be adopted to ensure transparent procedures and adequate asset sale pricing, according to OECD principles and standards on the management of State Owned Enterprises (SOEs);

• in line with the Greek government ambitions, to modernise and significantly strengthen the Greek administration, and to put in place a programme, under the auspices of the European Commission, for capacity-building and de-politicizing the Greek administration. A first proposal should be provided by 20 July after discussions with the Institutions. The Greek government commits to reduce further the costs of the Greek administration, in line with a schedule agreed with the Institutions.

• to fully normalize working methods with the Institutions, including the necessary work on the ground in Athens, to improve programme implementation and monitoring.  The government needs to consult and agree with the Institutions on all draft legislation in relevant areas with adequate time before submitting it for public consultation or to Parliament.  The Euro Summit stresses again that implementation is key, and in that context welcomes the intention of the Greek authorities to request by 20 July support from the Institutions and Member States for technical assistance, and asks the European Commission to coordinate this support from Europe;

• With the exception of the humanitarian crisis bill, the Greek government will reexamine with a view to amending legislations that were introduced counter to the February 20 agreement by backtracking on previous programme commitments or identify clear compensatory equivalents for the vested rights that were subsequently created.

  • i.e. a tsunami of foreclosures is ante portas; i.e. the Greek people who maintain the HSFS and the banks will have precisely zero control over the HFSF and the banks; and eliminating political influence except for the Troika.

  • i.e. privatization via an East German-like Treuhand is envisioned to sell off all public property but without the equivalent large investments that W. Germany put into E. Germany in compensation for the Treuhand disaster; i.e. public property will be sold off and the pitiful sums will go toward servicing an unsericable debt - with precisely nothing left over for public or private investment; and i.e. (the fund from asset sales) will be nominally in Greece, but just like the HFSF or the Bank of Greece, itwill be controlled fully by the creditors.



  • i.e. turning Greece into a democracy-free zone modelled on Brussells, a form of supposedly technocratic government, which is politically toxic and macro-economically inept; and to reduce the lowest wages while increasing a little the wages odsome of the Troika-friendly apparatchiks.


  • i.e. the Troika strikes back and demands that the Greek government invite it to return to Athens as Conqueror - the Carthaginian Peace in all its glory; and i.e.  Greek Parliament must, again, after five months become an appendage of the Troika - passing translated legislation mechanistically.





  • i.e. In addition to promising that it will no longer legislate autonomously, the Greek government will retrospectively annul all Bills it passed over the last five months.



The above-listed commitments are minimum requirements to start the negotiations with the Greek authorities. However, the Euro Summit made it clear that the start of negotiations does not preclude any final possible agreement on a new ESM programme, which will have to be based on a decision on the whole package (including financing needs, debt sustainability and possible bridge financing).

The Euro Summit takes note of the possible programme financing needs of between EUR 82 and 86bn, as assessed by the Institutions envelope, through an alternative fiscal path or higher privatisation proceeds  Restoring market access, which is an objective of any financial assistance programme, lowers the need to draw on the total financing envelope.

  • i.e. self-flaggellate, impose further austerity upon an economy crushed by austerity, and then we shall see whether the Eurogroup will grace you with another toxic, unsustainable loan
  • i.e. The Eurogroup conjured up a huge number, well above what is necessary in order to signal the debt restructuring is out and that debt bondage ad infinitum is the name of the game; i.e. And (with respect to reducing the financing envelope) it may (be) possible that pigs will fly; i.e. (with repsect to restoring market access) which is something the creditors will do their utmost to avoid, e.g. by ensuring that Greece will only neter the ECB's quantitatiuve easing program in 2018, once quatitative easing is ... over.

The Euro Summit takes note of the urgent financing needs of Greece which underline the need for very swift progress in reaching a decision on a new MoU: these are estimated to amount to EUR 7bn by 20 July and an additional EUR 5bn by mid August [i.e. Extend and Pretend gets another spin.] The Euro Summit acknowledges the importance of ensuring that the Greek sovereign can clear its arrears to the IMF and to the Bank of Greece and honour its debt obligations in the coming weeks to create conditions which allow for an orderly conclusion of the negotiations. The risks of not concluding swiftly the negotiations remain fully with Greece [i.e. Once more, demanding that the victim takes all the blame in behalf of the villain.] The Euro Summit invites the Eurogroup to discuss these issues as a matter of urgency.

Given the acute challenges of the Greek financial sector, the total envelope of a possible new ESM programme would have to include the establishment of a buffer of EUR 10 to 25bn for the banking sector in order to address potential bank recapitalisation needs and resolution costs, of which EUR 10bn would be made available immediately in a segregated account at the ESM [i.e. the Troika admits that the 2013-14 recapitalisation of the banks, which would only need a top up of at most 10 billion, was insufficient - but, of course, blames it on... the Syriza government.]

The Euro Summit is aware that a rapid decision on a new programme is a condition to allow banks to reopen, thus avoiding an increase in the total financing envelope [i.e. The Troika closed Greece's banks to force the Syriza government to capitulate and now cries out for their re-opening.] The ECB/SSM will conduct a comprehensive assessment after the summer. The overall buffer will cater for possible capital shortfalls following the comprehensive assessment after the legal framework is applied.

  • i.e. Extend and Pretend gets another spin; and i.e. Once more, demanding that the victim takes all the balme in behalf of the villain.




  • i.e. The Troika admits that the 2013-14 recapitalization of the banks, which would only need a top up of at most 10 billion, was insufficient - but of course, blames it on ... the Syriza government.




  • i.e. The Troika closed Greece's banks to force the Syriza government to capitulate and now cries out for their reopening.

There are serious concerns regarding the sustainability of Greek debt [N.b. Really? Gosh!] This is due to the easing of policies during the last twelve months, which resulted in the recent deterioration in the domestic macroeconomic and financial environment [i.e. It is not the Extend and Pretend ‘bailout' loans of 2010 and 2012 that, in conjunction with GDP-sapping austerity, caused the debt to scale immense heights - it was the prospect, and reality, of a government that criticized the the Extend and Pretend ‘bailout' loans that... caused Debt's Unustainability!]

The Euro Summit recalls that the euro area Member States have, throughout the last few years, adopted a remarkable set of measures supporting Greece's debt sustainability, which have smoothed Greece's debt servicing path and reduced costs significantly [i.e. The 1st & 2nd ‘bailout' programs failed, the debt skyrocketing as it was always going to since the real purpose of the ‘bailout' programs was to transfer banking losses to Europe's taxpayers.] Against this background, in the context of a possible future ESM programme, and in line with the spirit of the Eurogroup statement of November 2012 [i.e. a promise of debt restructure to the previous Greek government was never kept by the creditors], the Eurogroup stands ready to consider, if necessary, possible additional measures (possible longer grace and payment periods) aiming at ensuring that gross financing needs remain at a sustainable level. These measures will be conditional upon full implementation of the measures to be agreed in a possible new programme and will be considered after the first positive completion of a review [i.e. Yet again, the Troika shall let the Greek government labour under un-payable debt and when, as a result, the program fails, poverty rises further and incomes collapse much more, then we may haircut some of the debt - as the Troika did in 2012.]

  • N.b.  Really?  Gosh! and i.e. It is not the Extend and Pretend ‘bailout' loans of 2010 and 2012 that, in conjunction with GDP-sapping austerity, caused the debt to scale immense heights - it was the prospect, and reality, of a government that criticized the the Extend and Pretend ‘bailout' loans that... caused Debt's Unustainability!



  • i.e. The 1st & 2nd ‘bailout' programs failed, the debt skyrocketing as it was always going to since the real purpose of the ‘bailout' programs was to transfer banking losses to Europe's taxpayers;
  • i.e. a promise of debt restructure to the previous Greek government was never kept by the creditors; and
  • i.e. Yet again, the Troika shall let the Greek government labour under un-payable debt and when, as a result, the program fails, poverty rises further and incomes collapse much more, then we may haircut some of the debt - as the Troika did in 2012.





The Euro Summit stresses that nominal haircuts on the debt cannot be undertaken.  Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and in a timely manner.  Provided that all the necessary conditions contained in this document are fulfilled, the Eurogroup and ESM Board of Governors may, in accordance with Article 13.2 of the ESM Treaty, mandate the Institutions to negotiate a new ESM programme, if the preconditions of Article 13 of the ESM Treaty are met on the basis of the assessment referred to in Article 13.1. To help support growth and job creation in Greece (in the next 3-5 years) the Commission will work closely with the Greek authorities to mobilise up to EUR 35bn (under various EU programmes) to fund investment and economic activity, including in SMEs. As an exceptional measure and given the unique situation of Greece the Commission will propose to increase the level of pre-financing by EUR 1bn to give an immediate boost to investment to be dealt with by the EU co-legislators . The Investment Plan for Europe will also provide funding opportunities for Greece.
  • N.b.  The Syriza government has been suggesting, since January, a moderate debt restructure, with no haircuts, maximizing the expected net present value of Greece's repayments to creditors' - which was rejected by the Troika because their aim was, simply, to humiliate Syriza.
  • N.b.  (Provided necessary conditions) Which can only happen after a substantial debt restrucuture.
  • N.b.  Having already destroyed growth and jobs for the past five years...
  • i.e. Will use the same order of magnitude of structural funds, plus some fantasy money, as were available in 2010-2014..
  • i.e. Of the headline 35 billion, consider 1 billion as real money.
  • i.e. the same plan that most Eurozone ministers of finance refer to as a phantom program.



 

To read the original annotated document click here.

Source:

 









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