Introductory text

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability^f1, and in particular Article 7(5) thereof,

Having regard to the proposal from the European Commission,

Whereas:

On 16 July 2015, the European Stability Mechanism (‘ESM’) Board of Governors invited the Commission, in liaison with the European Central Bank (‘ECB’), the ESM, the Greek authorities, and, where appropriate, the International Monetary Fund (‘IMF’), to agree on a macroeconomic adjustment programme for Greece in the form of a loan. The programme was prepared in accordance with the procedure provided for under Article 7(1) of Regulation (EU) No 472/2013. On 11 August 2015, those institutions reached an agreement at technical level on a macroeconomic adjustment programme (the ‘Programme’) with the Greek government. On the basis of a proposal by the Commission, the Programme was adopted by the Council in the form of a Council Implementing decision^f2.

Following that agreement, Greece adopted a comprehensive policy package that was to be implemented in a three-year ESM macroeconomic adjustment programme, which would span from the third quarter of 2015 to the third quarter of 2018.

The comprehensive policy package, laid down in the ESM Memorandum of Understanding on Specific Economic Policy Conditionality (the ‘Memorandum of Understanding’) of 19 August 2015, aims to restore financial market confidence, to re-establish sound macroeconomic balances and to enable the economy to return to sustainable growth. It is based on four pillars: restoring fiscal sustainability, safeguarding financial stability, enhancing competitiveness and growth, and modernising the State and the public administration.

After the first review of the Programme was completed, and following the Eurogroup statement of 25 May 2016, the positive assessment by the Commission and ECB of the implementation of the Programme and the approval of the ESM, Greece and the Commission (on behalf of the ESM) signed a Supplementary Memorandum of Understanding on 16 June 2016. The Supplementary Memorandum of Understanding updates the policy conditions set out in the Memorandum of Understanding to reflect the progress achieved in the implementation of the Programme.

On 25 May 2016, the Eurogroup also considered the sustainability of Greek debt. It agreed on a package of debt measures to be phased in progressively and as necessary to meet the agreed benchmark on gross financing needs. The Eurogroup agreed that the first set of measures would be implemented in the short term, that is, from after the closure of the first review until the end of the Programme. On 23 January 2017, the Boards of Directors of the ESM and European Financial Stability Facility adopted the rules relating to the set of short-term debt relief measures for Greece, the implementation of which has begun. The Eurogroup of 25 May 2016 also agreed that after the successful implementation of the Programme by mid-2018, the Eurogroup would expect the implementation of a possible second set of measures, if needed to meet the agreed debt sustainability benchmarks.

On 25 May 2016, the Eurogroup welcomed the intention of the IMF management to recommend to the IMF's Executive Board that it approve a financial arrangement for Greece. The Eurogroup confirmed that position on 5 December 2016, and also stressed the need for shared conditionality, which should be agreed between all the institutions and Greece. On 5 December 2016, the Eurogroup also called upon the institutions and Greece to swiftly resume negotiations in order to reach a staff level agreement (as soon as possible, based on such shared conditionality), and authorised the Eurogroup Working Group to assess that staff level agreement. That conditionality includes the adoption of a pre-legislated fiscal package to help ensure a primary surplus of 3,5 % of GDP over the medium term.

The Greek economy has shown a high degree of resilience to the environment of elevated uncertainty and the imposition of capital controls, with GDP contracting by only 0,2 % in 2015. In 2016, the Greek economy stagnated, as nascent growth in private consumption was offset by a decline in both public consumption and net exports. The Commission Spring 2017 forecast projects the Greek economy to grow by 2,1 % and 2,5 % in 2017 and 2018 respectively, on the back of improving economic sentiment supporting investment and consumption.

Under that forecast, the debt-to-GDP ratio would amount to 179,0 % in 2016, 178,8 % in 2017, 174,6 % in 2018 and 165,2 % in 2019. The debt-to-GDP ratio would therefore move to a declining path as from 2017. Greece achieved primary surpluses of 0,5 % of GDP in 2015 and 4,2 % of GDP in 2016, outperforming its Programme targets of – 0,25 % and 0,5 % of GDP, respectively. The Greek authorities are to pursue a fiscal path premised on primary surplus targets of 1,75 % of GDP in 2017 and 3,5 % of GDP in 2018 and over the medium term. The trajectory of the fiscal targets is consistent with the expected growth rates of the Greek economy as it recovers from its deepest recorded recession.

In light of the updated forecasts by the Commission services, and in light of the results of the second review that was conducted by the Commission in liaison with the ECB and, where appropriate, with the IMF, an update should be made to the existing Programme to reflect the reforms carried out by the Greek authorities by the end of the first quarter of 2017. On that basis, the updated conditionality should outline the range of policies needed for the successful implementation of the Programme in the future, with the aim of returning the Greek economy to sustainable growth. It is therefore appropriate to amend Council Implementing Decision (EU) 2016/544.

Any form of financial assistance received by Greece to help it implement the policies under its Programme should be in line with the legal requirements and policies of the Union, in particular the Union's economic governance framework and the Charter of Fundamental Rights of the European Union (‘the Charter’). To the extent that any of the measures envisaged in the macroeconomic adjustment programme limit the exercise of the rights and freedoms recognised by the Charter, those limitations are in conformity with Article 52(1) thereof. Any intervention in support of financial institutions should be carried out in accordance with the Union's rules on competition. The Commission should ensure that any measures laid down in a Memorandum of Understanding in the context of requested ESM financial assistance is fully consistent with this Decision,

HAS ADOPTED THIS DECISION: