Brussels, 11 July 2018
What did the Commission decide today?
The European Commission adopted a decision to activate the enhanced surveillance framework to facilitate Greece’s normalisation, building on the progress that has been made. This approach was agreed by the euro area finance ministers during the Eurogroup on 22 June, in full cooperation with the Greek authorities and after consultation with the Commission.
What is meant by enhanced surveillance?
Enhanced surveillance is a framework designed to facilitate normalisation and support the completion, delivery and continuity of reforms the Greek authorities have committed to implementing under the current stability support programme.
It also allows for close monitoring of the economic situation and its evolution in Greece following the conclusion of the European Stability Mechanism (ESM) stability support programme on 20 August 2018.
It will make it easier to identify risks as they develop and will facilitate appropriate follow-up on the completion, continuity and delivery of reform implementation across all policy areas addressed under the ESM programme.
Does enhanced surveillance constitute a new programme or an extension of the current programme?
No. Enhanced surveillance does not represent an extension of the current programme or a new programme. The current programme will conclude on 20 August.
The enhanced surveillance framework facilitates support for the completion, delivery and continuity of reforms the Greek authorities have committed to implementing under the current stability support programme.
Importantly, enhanced surveillance does not involve new conditionality. The commitments undertaken are only about completing a number of reforms already initiated by Greece under its stability support programme and providing the incentives and reassurances necessary as debt measures are implemented in the months and years to come.
What commitments will be monitored under enhanced surveillance?
Surveillance will focus on the six areas in regards to which Greece made specific commitments in the context of the 22 June Eurogroup agreement. These include fiscal and fiscal structural policies, social welfare, financial stability, labour and product markets, privatisation, and public administration.
Has this framework been employed before?
All Member States that have benefited from financial assistance programmes are subject to post-programme surveillance. This also requires regular missions and reporting, as well as monitoring of reform implementation in the post-programme years.
However, this is the first time that the enhanced surveillance instrument introduced by the two-pack Regulation (472/2013) has been activated. Given the length of the Greek crisis and the extended period in which it has been receiving financial assistance, its still high debt level, and the recent agreement on an unprecedented package of debt measures, enhanced surveillance is an appropriate approach to facilitate support for the implementation of agreed reforms in the post-programme period.
What are the differences between standard post-programme surveillance and enhanced surveillance?
Under enhanced surveillance, Greece will be monitored through more frequent review missions from the Commission and partner institutions. Reporting will take place on a quarterly basis. It is intended that this monitoring will to a large extent coincide with that taking place under the normal European Semester process, which will now apply to Greece as it does to all other Member States. Synergies between the two procedures will be maximised.
Under enhanced surveillance, the Greek authorities will also need to provide more detailed data than under standard post-programme surveillance.
What is the legal basis for enhanced surveillance?
Enhanced surveillance is provided for under Regulation 472/2013 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 (under the so-called ‘Two-Pack’ legislation).
How will the other institutions be involved?
Regulation 472/2013 provides that the Commission undertakes enhanced surveillance in liaison with the European Central Bank (ECB) and, where appropriate, the International Monetary Fund (IMF).
The ESM will be involved under its Early Warning System, as is standard practice for post-programme surveillance.
The IMF has committed to remain fully engaged in Greece following the conclusion of the ESM programme.
What is the relationship between enhanced surveillance and implementation of debt relief measures?
The activation of policy-contingent debt measures agreed at the Eurogroup meeting of 22 June will be based on positive reports conducted under the enhanced surveillance framework.
Specifically, a positive enhanced surveillance report will enable the transfer back to Greece of the budgetary equivalent of income from national central banks’ holdings of Greek bonds (so-called SMP/ANFA profits). These profits will be transferred to Greece in equal amounts on a semi-annual basis in December and June, starting in 2018 until June 2022, subject to positive enhanced surveillance reports. This is in addition to the agreed waiver of the step-up interest rate margin related to the debt buy-back tranche of the 2nd Greek programme as of 2018. These measures together will make additional capital available to Greece in the immediate post-programme years even though the country is no longer under programme.
Until when will Greece remain under enhanced surveillance?
The enhanced surveillance will apply for an initial six month period, as per the legal provisions. It can be renewed every six months and is likely to remain in place for the same period as policy-contingent debt measures, i.e. until 2022.
Regular post-programme surveillance will begin once the enhanced surveillance framework ends (or is no longer renewed) and will last until a minimum of 75% of financial assistance that Greece has received has been repaid. This is the case for all post-programme countries.
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