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Monday, March 2, 2015

Spanish FinMin and EFSF: Memoranda Not Over for Greece

A third bailout package for Greece amounting between 30 and 50 billion euros is currently being envisaged by the Eurozone member-states’ Finance Ministers, according to Spanish Finance Minister Louis de Guindos. As de Guindos highlighted, the terms of the third bailout program will be more flexible compared to the previous ones and will allow Athens to achieve its goals and implement reforms. Furthermore, while addressing voters in the city of Pamplona, the Spanish Finance Minister stressed that from his point of view he sees no other way for Greece beyond European solidarity. At the same time, the European Financial Stability Facility (EFSF) has also renewed the scenarios regarding a new Greek bailout package, stating that the Memorandum of Understanding (MoU), on which the loan assistance to Greece depends, has no termination date, in what is seen as a clear contradiction with the newly elected Greek government’s claims that the Memoranda are over. According to the EFSF, the four-month loan extension agreement reached between Athens and its Eurozone partners requires “Greece’s compliance with policy reform measures set out in the MoU, which was agreed by Greece, the European Commission, and the ECB.” More importantly, though, EFSF clarified that the Memorandum does not need an extension as “it has no termination date.” The EFSF statement The Greek Master Financial Assistance Facility Agreement (MFFA) is a legal contract between the EFSF, the Greek government, the Bank of Greece, and the Hellenic Financial Stability Fund (HFSF), which is Greece’s national bank recapitalization fund. It specifies the terms and conditions of the financial assistance to Greece, regarding e.g. the loan amount, availability period, fees, interest and repayment. It is signed by the EFSF CEO and the Greek Finance Minister. The provision of financial assistance under the MFFA is conditional upon Greece’s compliance with policy reform measures set out in the MoU, which was agreed by Greece, the European Commission, and the ECB. The MoU is a separate and self-standing document, but is linked to the MFFA – no disbursement can be made without MoU compliance, which is assessed by the institutions. The Greek MFFA originally expired on December 31, 2014. But on December 19, 2014, the EFSF Board of Directors decided to grant a technical extension until February 28, 2015. On February 27, 2015, the EFSF Board of Directors decided to further extend the Greek MFFA by four months until June 30, 2015. In addition, it should be noted that the MoU is a document that is often updated when a review takes place, potentially reflecting new circumstances and the need to adapt the list of policy measures to be implemented. The MoU (unlike the MFFA) did not have to be extended because it has no termination date. Greek government’s reaction Following the above EFSF statement, the Greek government replied that the Memorandum in Greece ended on January 25 and calls on those in charge of the EFSF to get informed on the tough negotiations that took place during three consecutive Eurogroup meetings, designed especially for reaching a joint communique in which there is no mention of Memoranda, signed by the previous governments. Similarly, the representative of Eurogroup President Jeroen Dijsselbloem, Simone Boitelle, has also ruled out such a development, underlining that the “Eurozone Finance Ministers are not discussing a third bailout.”