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11/2/2015 – YANIS VAROUFAKIS TALK IN THE 11TH FEBRUARY

2015 EUROGROUP MEETING

Mr President, (Jeroen Dijsselbloem)

Dear Colleagues,

It is a great honour for me to join this Eurogroup meeting as finance minister in

the newly elected Greek government.

On January 25th, the Greek people strongly mandated us to terminate the cycle

of austerity that has caused economic damage and immense social costs.

The new government led by Alexis Tsipras has committed to bring back hope,

dignity and pride to Greek citizens and to implement a comprehensive policy

agenda to deal with the roots of Greece’s socio-economic under-performance.

For five years now, many of you have spent endless hours discussing ways and

means of dealing with yet another episode of the endless saga that seems to be

the Greek crisis.

I understand your fatigue. I understand that Europe has had enough of Greek

dramas. But believe me: The Greek people themselves have had much more

than enough of it too.

It is our aim and hope that this meeting, and maybe one or two more, will be the

last ones to feature Greece on the agenda. My government was elected in order

to stabilize, to reform, to grow Greece and thus to take it out of the headlines and

off the Eurogroup’s future agenda.

But first things first. First, we must earn a very precious currency without

depleting an important capital good: We must earn your trust without losing the

trust of our people – of the voters amongst which we enjoy, for now, sizeable

approval ratings. For such approval is an important capital good in Europe’s

struggle to sort Greece out and to render it stable and, indeed, normal.

In this time of change, we hear your concerns about our government’s intentions.

We need, clearly, to put them to rest.

I am here today to convey to you a clear message on the new government’s

program and commitments to its Eurogroup partners.

(Government Commitments)

Greece, as a member of the Eurozone, is fully committed to find a solution jointly

discussed between partners, in order to strengthen our monetary union.

We are committed to cooperate in good faith with all our European and

international partners, on an equal footing.

Our citizens have rejected the role of the ‘Troika’ in Greece. Our government will

however maintain dialogue and continue to cooperate fully with the European

Commission, the ECB and the IMF as a member country of the European Union,

the Euro Area and the Fund. Our future cooperation should be based on mutual

trust and respect and channelled primarily through the European Commission

while we work with each of our partner institutions in their specific areas of

expertise and competence.

We are committed to sound public finances. Greece has made a vast adjustment

over the past five years at immense social cost. Its deficit is now below 3% in

nominal terms, down from 15% in 2010. Its primary surplus has reached 1.5% at

the end of last year, its structural balance, as measured by the IMF, has reached

a surplus of 1.6%, the best performance in the EU.

The new government takes this adjustment as its point of departure. We wish

now to move forward, on the basis of a new mutually beneficial partnership with

our European partners.

We are committed to deep structural reforms.

Our reform agenda aims at re-creating confidence among Greek citizens, growth

in the economy, and credibility in Europe. It recognizes the need for deep

reforms to anchor the long-term prosperity of Greece within the Eurozone.

Our government will be the most reform-oriented government in Greek modern

history, and among the most enthusiastic reformers in Europe. Why? Simply

because we are not tied to any interest groups. We will deliver results for the

people, not for friends or patrons.

We will not only commit to reforms, we will deliver them.

This morning the OECD Secretary General has agreed to assist us in this task.

Your help, the Commission’s help, the IMF’s help, will also be necessary in

important areas where powerful opposing interests are entrenched and the

political challenges are especially great. We may be an inexperienced

government but we have sizeable support from a fed up population to cut through

not just red tape but also to cut through the Gordian knot of vested interests.

We stand ready to support structural reforms previously agreed with our

Eurogroup partners with regard to tax collection, public financial management,

public administration reform, improvement of the business climate, reform of the

judiciary, spatial planning and fight against rent-seeking. They are fully consistent

with our political mandate, and we will even accelerate them.

We will take unprecedented action to fight corruption, to fight tax evasion and

ensure tax enforceability, with an emphasis on transfer pricing in large corporates

active abroad.

We want to discuss legislative proposals to reinforce the legal framework for an

independent tax authority.

Technical assistance from you on these issues will be critical, not least because

it will enhance trust between us and you.

A full legislative package will create favourable conditions for the economy,

improve the business climate and undermine rent-seeking, in particular in the oil

sector, procurement, the construction sector, the financial sector, and the media.

We will make public procurement procedures more transparent thanks to a more

centralized system, efficient monitoring and e-procurement.

We will improve the overall efficiency of the public sector to increase the quality

of services delivered to every citizen and tackle administrative burden.

In addition, we will propose a new set of home-grown reforms to support

investment, restart growth, and improve economic efficiency.

Investment should be revived, in Greece and in the whole Europe.

We want to revive infrastructure projects with public and private investors and the

support of the EU. Indeed, we have some innovative ideas of our own that may

help mobilize idle savings into productive investments throughout the Continent,

in support of the current efforts of the Commission to enhance investment and of

the European Central Bank to stem deflationary forces.

Returning to Greece, we want to invest to reduce energy costs for medium and

large scale industries, to support innovation, start-ups and to promote a shift

towards sectors with comparative advantages and export potential such as

pharmaceuticals, organic agriculture, light manufacturing, energy resources, with

the emphasis naturally on renewables.

On privatization and the development of publicly owned assets, the government

is utterly undogmatic; we are ready and willing to evaluate each and every one

project on its merits alone. Media reports that the Pireus port privatisation was

reversed could not be further from the truth. Indeed, quite the opposite holds as

foreign direct investment will be encouraged as long as the state secures a

stream of long term revenues and a say in labour relations and environmental

issues.

Quick fire sales of public property, at a time when asset prices are deeply

depressed, is not something that anyone would advocate.

Instead, the government will create a development bank which will incorporate

state assets, enhance their equity value through reforming property rights and

use them as collateral for the purposes of providing, in association with European

investment institutions such as the European Investment Banks, funding to the

Greek private sector.

We want to take additional measures to clean-up non-performing loans in the

banking sector to render the banks able to support SMEs and households.

Several misleading reports have caused misunderstandings with our partners by

insinuating that we have rolled back previous reforms and added to our state

budget. On the contrary, the measures announced by the Prime Minister with

respect to rehiring tax office cleaners, school guards and the staff of the public

broadcasting network: (1) have no adverse effect on competitiveness and (2)

have no fiscal bearing as they will be paid for entirely by other savings in the

state budget. For example, the wrongfully dismissed staff that will be rehired

number 2013 people, a tiny number that must be juxtaposed against the 15

thousand hirings that are already inscribed in the 2015 budget that the previous

government passed.

On two other emotive topics, let me clarify that the restoration of the pension cuts

we announced concern pensioners living at or below the poverty line and comes

up to less than 2 euros per day per eligible pensioner – at a grand total of around

9.5 million. The reason we made this announcement is one that I shall return to,

as I must, during our discussions: The appalling humanitarian crisis caused by

the debt-deflation.

On the minimum wage, the government will phase in its restoration to the 2012

level gradually, from September onwards and after consultation with employers

and trades unions. As it applies only to the private sector, its fiscal impact will be,

if anything, quite positive, as its multiplier effect is large and likely to boost tax

revenues beyond the affected employees. Will it reduce competitiveness of the

private sector? The government commits to reforms, e.g. in social security,

reducing the tax wage that will ensure it does not.

(A New Partnership)

The new partnership we propose to you should be based on realistic goals and

efficient policies.

We recognize that the previous adjustment program reflected commitments

made by both Greece and its Eurogroup partners.

We recognize the tremendous efforts made by your countries’ taxpayers to

support Greece’s debt and maintain the integrity of the euro.

However, unrealistic, self-defeating fiscal targets have been imposed on our

country and population and hence must be revised. A primary surplus target of

4.5% of GDP year-in-year-out has no historical precedent in any situation

resembling that of Greece today. It will simply not be possible for our country to

grow if we remain on the growth sapping austerity path imposed on our

economy. It is also quite inconsistent with achieving a sustainably reduced debt-

to-GDP ratio.

The new contract we propose to discuss with you should recognize this

evidence.

Continued primary surpluses will remain our mantra. We propose a maximum

1.5% of GDP primary surplus objective, from as soon as the present disturbed

economic situation has stabilized and for as long as necessary to achieve the

underlying goals. This objective can be shown to be sufficient, under very

reasonable assumptions, to put the debt trajectory on a downward path.

The new contract will build upon reforms that are ‘owned’ by citizens’ and

domestic institutions, using many elements from the previously agreed policy

agenda. This also means that the hope of shared prosperity must be revived.

We wish to discuss with you this home-grown agenda that reflects both our

potential and specific constraints. We wish our growth to be inclusive, based on

investment, and productivity gains. Growth based on further labour cost

compression cannot work in Greece and has been rejected by our people.

Based on more realistic primary surplus targets and our home-grown, wholly

owned, reform and growth agenda, the new contract we propose will restore a

sustainable debt trajectory.

We invite the IMF to work with us to assess Greek debt sustainability building on

the government’s commitments. This new DSA should reflect the concessional

features of Greek debt due to its very long maturity and low interest charge.

It is probable however that additional measures will be required to ensure

Greece’s capacity to re-access the financial markets.

Eurogroup committed in November 2012 to tackle this issue once Greece would

post primary surpluses, which was the case in 2014 and will be the case in 2015

once the current situation stabilizes. This discussion should be reopened when

we will discuss our new contract.

Greece will stand ready to make concrete proposals to its partners, in due time,

on a menu of innovative instruments to reduce the debt burden efficiently,

including debt swaps.

Moreover, we believe that a broader discussion on debt issues in Europe is

necessary. We welcome Mr Dijsselbloem’s recent statement in our joint press

conference in Athens that the Eurogroup is the proper forum to act as a

permanent European debt conference, addressing debt problems in Euro area

member States. We therefore propose to create a specific Eurogroup working

group gathering member states’ representatives and experts.

(A Bridge Program)

Agreeing on a new policy framework between Greece and its Eurogroup and

international partners will take some time.

In the meantime, covering Greece’s financing needs over the next months is an

immediate concern for all of us.

Until June, Greece faces €5.2bn payments to the IMF: our government is fully

committed to honor these payments, possibly directly to the IMF.

To meet our immediate payment obligations, we ask the Eurogroup to disburse

to Greece the outstanding €1.9bn SMP bond-related Eurosystem income, in

accordance with its previous commitments. We are, in fact, open to the idea that

the ECB transfers these funds directly to the IMF in lieu of Greece’ outstanding

repayments.

Moreover, we propose to work urgently on a bridge financing mechanism to

ensure Greece’s liquidity position over the coming months.

In July and August, €6.7bn repayments are scheduled to the ECB (as the holder

of SMP bonds), on top of additional payments to the IMF. These payments

create very exceptional pressure on Greece’s funding needs in 2015.

We are confident that an agreement can be reached before the summer, notably

with the IMF’s input, that would provide solutions and funding sources to cover

these needs.

(Technical Extension)

Let me conclude now on the technical and legal issues concerning the existing

loan agreement.

We fully understand that the dates associated with the existing loan agreement

must be moved forward in order to provide stability, to give time to the

discussions, and allow for the disbursement of SMP bond-related funds and

possibly other funds. We remind you that the present deadline of 28/2/2015 are

entirely artificial, and were the product of the previous government’s electoral

strategy and desire to confront us with these difficulties on taking office. It is time,

in good faith, for these maneuvers to stop and for serious work to begin.

We stand ready to ask for a revision of these dates in view of the next scheduled

Eurogroup meeting next Monday the 16th of February 2015.

However, let me be very clear on this: the government asks for this revision of

dates on the condition that it is the starting point for genuine negotiations in good

faith for forging a different contract between us, based a realistic primary surplus

effort and efficient as well as socially just structural policies – including of course

many elements of the previous program that we accept. We need assurances on

this point.

We can accept this revision of dates as a “bridge” towards a new partnership and

a necessary condition for the discussion. However, such an extension cannot be

taken as acquiescence to the logic and parts of the former agenda that have

been rejected by our people.

We propose the bridge program to cover the period until end-August. This will

provide sufficient time to agree on the terms of our partnership. A partnership

that will bind our side to deep reform but also acknowledge and address

Greece’s hideous humanitarian crisis, the non-availability of credit even for

profitable firms, and the urgent need for investment-led growth.

Dear Colleagues,

Europe is whole and indivisible, and the government of Greece considers that

Greece is a permanent and inseparable member of the European Union and our

monetary union.

Surely there are various ways to foster policies that will truly nurture and enhance

economic growth, maintain fiscal and financial stability, and address the most

pressing needs of the people.

Some of you, I know, were displeased by the victory of a leftwing, a radical

leftwing, party. To them I have this to say: It would be a lost opportunity to see us

as adversaries.

We are dedicated Europeanists. We care about our people deeply but we are not

populists promising all things to all people. Moreover, we can carry the Greek

people along an agreement that is genuinely beneficial to the average European.

In us you will find trustworthy partners who do not see these meetings as a

means of extracting something out of nothing, of gaining at anyone’s expense.

I look forward to discuss with you now, in a true spirit of cooperation and

partnership, and to write together this new page of our relationship.

I thank you very much for your attention.

EUROGROUP MEETING – FEBRUARY 11, 2015 – BRUSSELS

NON-PAPER FROM THE GREEK GOVERNMENT

On January 25th, Greek citizens sent an unequivocal signal of change and

endorsement of the new social contract for political stability and economic

security proposed by SYRIZA.

The new government is committed to implement policies that will deeply reform

Greece’s social economy, reduce rent-seeking, anchor euro membership and

reflect the will of the Greek people. These policies will address the humanitarian

crisis, enhance social cohesion, restore justice and dignity, put the Greek

population back on its feet and restore economic growth.

The government knows that improving citizens’ daily lives requires

macroeconomic, fiscal and financial stability. As such, the Greek authorities

intend to maintain sound public finances and to preserve financial sector stability.

They stand ready to commit to realistic and reasonable quantitative targets in

that regard.

There is a way to foster policies that will restore growth and maintain fiscal

stability, while addressing the most pressing needs of the people. These policies

should be part of a new agreement between Greece and its Eurogroup partners

that focus on economic development, investment, social conditions and improved

public management.

Greece has made an extraordinary adjustment over the course of the past five

years. Its deficit is now below 3% of GDP, down from 15% in 2010. Its primary

surplus has reached 1.5%, its structural balance, adjusting for the output gap as

measured by the IMF, has reached a surplus of 1.6%, one of the highest in

Europe.

The new government takes this adjustment as its starting point. The task now is

to stabilize the Greek economy and society, which has paid an immense and

unsustainable price, and this requires changes to the previous policies. However,

agreeing on a new policy framework between Greece and its partners will take

time. The government proposes to its Eurogroup partners to agree immediately

on a bridge and stabilization program for the next seven months (e.g. up to end-

August), with a 90 day-period for negotiations on the terms at the beginning.

These will provide the appropriate time-frames to agree on and to begin to

implement policies that will repair society, restore confidence, and support growth

and development in Greece.

Greek Government Policy Objectives & Commitments

The government is ready to commit to the following:

The government commits to maintain a 1.5% primary fiscal surplus in 2015,

when the domestic situation has stabilized, and to maintain that objective until

such time as normal conditions are restored and the debt ratio is on a clear

downward path.

To meet this objective, the government will refrain from spending measures that

might derail the budget target and it will increase efforts to improve tax

collection. Increases in spending will focus on investments financed by the

European Investment Bank and other outside sources, and on measures

addressing the humanitarian crisis including a food stamps program, minimum

electricity and heating and basic transport. Insofar as these must rely on

domestic resources they will be balanced by additional revenues or offsetting

spending reductions, as required to maintain the fiscal objectives.

Unrealistic fiscal targets are self defeating and must be revised. The primary

surplus target of 4.5% of GDP over the medium term and 4% over the long-term

was entirely artificial, has no historical precedent resembling Greece’s

circumstances, and has essentially no support from among reputable

economists. In practice pursuit of such a target is also unsustainable, and the

goal of putting debt-to-GDP on a clear downward path requires that it be revised.

Uncertainties surrounding the electoral period in Greece and the ultimate status

of Greece with respect to Europe have affected economic activity and fiscal

performance over the last two months. As a first step, it is essential to stabilize

the banking system immediately and to restore confidence in Greece as a full

and permanent member of the Eurozone. The Government of Greece requests

immediate affirmation and assistance from its Eurogroup partners to this end.

The stability of the Greek financial sector is of utmost importance to the

government and an immediate concern for the Euro Area as a whole.

Following the ECB Governing Council’s decision on Feb. 4th, Greek banks will

remain fully secured as they rely on Bank of Greece’s Emergency Liquidity

Assistance (ELA).

The government expects that an agreement with its Eurogroup partners on a

bridge program will allow the Governing Council to renew the waiver for eligibility

of Greek paper to Eurosystem refinancing operations.

In the medium term, additional action is required to support further the banking

sector. The government would like to discuss with its partners the mobilization of

remaining unspent resources available to the Hellenic Financial Stability Fund

(app. EUR 8 billion) to further strengthen the banking system. The government

stands ready to make a concrete proposal on how the remaining HFSF assets

could be used to clean out the banks from their NPLs. Moreover, HFSF

management should be made more transparent and efficient.

Covering gross financing needs in an immediate concern for the Greek

authorities.

Before June, Greece faces €5.2bn repayments to the IMF. The government is

fully committed to honor these payments. The government looks forward to a

positive discussion with the IMF on renewing a financing agreement based on an

updated DSA.

To meet its immediate payment obligations, the government asks the Eurogroup

to disburse to Greece the outstanding €1.9bn SMP bonds related Eurosystem

income, in accordance with Eurogroup previous commitments. After June,

€6.7bn repayments are scheduled over the summer to the ECB as the holder of

SMP bonds. This repayment creates very exceptional pressure on Greece’s

funding needs in 2015.

The government expects that an agreement regarding the issuance of T-bills will

be obtained to cover these exceptional needs. This would not raise the amount of

debt, but only change its composition.

Restoring debt sustainability is a key policy objective for the Greek authorities.

Additional measures will be required to restore Greece’s long-term solvency and

to ensure its capacity to borrow in the financial markets at reasonable cost in the

near future. Eurogroup committed in

November 2012 to tackle this issue once Greece would post primary surpluses,

which was the case in 2014 and will be the case in 2015.

IMF technical staff should work closely with the Greek team to assist in

developing a sustainable debt program, taking full account of the experience of

the recent past. Buttressed with quantifiable targets audited by unconflicted

parties, such an arrangement could form the type of covenant that the

government and the EU partners and bilateral lenders can accept.

In that framework, the authorities are ready to open discussion on options that

would bring Greece the necessary breathing space and ultimately the means to

restore access to financial markets. These options would be part of the “new

deal” to be sealed between Greece and its partners. They would be fully

consistent with (i) the new more realistic fiscal framework to be agreed; (ii) an

updated IMF Debt Sustainability Analysis taking stock of these new assumptions,

and (iii) a positive program for growth and social development to which the

government and the Greek people are firmly committed.

Greece is ready to make concrete proposals to its partners, in due time, on a

menu of instruments to reduce the debt burden efficiently, including debt swaps.

The Greek Government is working on a new agenda for growth and structural

reforms. The new agenda will address the causes of Greek economic decline

and help to modernize the Greek socioeconomic model.

The government undertakes to reduce tax evasion, tax immunity, smuggling,

cartelsand rent-seeking. Reforms will improve the enforcement of income tax,

VAT, and social contributions, and fight tax evasion with an emphasis on transfer

pricing in large corporates active abroad. The government stands ready to

discuss legislative proposals to reinforce the legal framework for an independent

tax authority within the Ministry of Finance.

A full legislative package will improve the business climate and undermine rent-

seekers, in particular in the oil sector, the financial sector, and the media. Public

procurement procedures will be made more transparent and fair thanks to a more

centralized system, efficient monitoring and e-procurement. Reforms will

increase the overall efficiency of the public sector, with an objective to improve

the quality of services delivered to every citizen. Policies undermining social

cohesion have failed and will be dropped.

Foreign investors remain welcome and the government will support their

investments in Greece. On privatization and the development of public assets,

the government is ready and willing to evaluate each and every project on its

merits alone.

To boost domestic investment and support economic recovery, the government

will create a national development bank, to which various public assets will be

transferred, and to support the SMEs. The national development bank will play a

leading role in channeling EIB loans allocated to private projects in Greece.

The Greek authorities have asked the Secretary General of the OECD, who has

accepted, for technical assistance in devising, implementing and monitoring this

new reform agenda.

This new agenda will give impetus to many of the policy actions listed in the

policy program previously agreed between Greece and its Eurogroup partners,

including tax policy, revenue administration, public financial management, public

administration effectiveness, collection of social contributions, promotion of

business investment, spatial management and planning, and reform of the

judicial system.

Over the bridge period during which this new contract will be prepared and

negotiated, the government will put a priority on the implementation of those

actions listed in the existing agreements that are fully consistent with its political

mandate. Altogether, they would represent more than 70% of the whole list of

previously-agreed actions. New initiatives announced by the government will be

programmed to take effect after the completion of successful negotiations.

Europe is whole and indivisible, and the government of Greece considers that

Greece is a permanent and inseparable member of the European Union and the

Eurogroup. The government is committed to a relationship between Greece and

its partners based on good faith, mutual trust, and a common commitment to the

European project. It is confident that a relationship firmly built on this basis can

work to restore the Greek economy and to anchor Greece’s future as a

prosperous member of the Euro Area.

16/2/2015 – YANIS VAROUFAKIS TALK IN THE 16TH FEBRUARY

2015 EUROGROUP MEETING

Mr President,

Dear colleagues,

This government’s task is to carry out the deep reforms that Greece needs to

arrest the combined forces of deflation and negative debt dynamics, bring about

investment-led recovery and, thus, maximise the net present value of our debt

repayments to our creditors.

The Greek government fully respects its commitments to our partners and to the

institutions that we are party to. Our difficulty in declaring a commitment to the

current program, and to its “successful conclusion”, is that in our estimation this

program was not conducive to recovery and, thus, inherently impossible to

conclude successfully.

To many, our reluctance to accept the phrase “extend the current program and

successfully complete it” stems from the determination of this government never

to issue a promise that it cannot keep. We fear that if we accept the priorities, the

matrix, of the current program, and only work within its overarching logic, even if

we change some aspects of it, I fear that we shall be giving the debt-deflationary

spiral another boost, we shall lose our people’s support, and, as a result, the

country will be very hard to reform henceforth. As a recently appointed finance

minister of a country that has a credibility deficit in this room, I trust that you will

understand my reluctance to promise that which I do not believe I can deliver.

Nevertheless, there is much that we can deliver that is of mutual benefit. To do

so, we need a short-term (three to six month long) agreement that will allow us to

establish the “common ground” mentioned by President JD and Prime Minister

AT last Thursday. It is in no one’s interest if, over the next days and weeks, as a

result of a political failure on our part Greece languishes under a collapse in

activity, a collapse in revenue and continued deposit outflows.

We need an in-principle agreement that during this period the Greek state will be

funded under a minimalist menu that solves the short term cash flow problem

(e.g. transfer to the IMF, in lieu of Greece’s repayments, of the €1.9 billion that

the Greek government is due from the ECB ‘profit’-rebate agreement; a flexible

ELA, a rise in the artificial cap of T-bill issues etc.) and commits the Greek

government to a number of conditionalities:

. The Greek government reiterates its commitment to the terms of its loan

agreement to all our creditors

. The Greek government takes no action that threatens to derail the existing

budget framework or that has implications for financial stability

. The Greek government will take no action toward a haircut of its loans’

face value

The Greek government is deeply concerned about the deleterious effects of

non-performing loans on the capacity of Greece’s private banks to extend

credit to firms and households and is, thus, keen to find means, utilising the

unused capacity of the HFSF to cleanse them. Similarly, we are eager to find

ways of writing off the accumulated penalties on taxpayers in arrears that

have mounted up to €70 billion. Naturally, the Greek administration

understands that any such write offs must be designed to avoid rewarding

strategic defaulters and, most certainly, to prevent a long term tendency to

delay paying debts and taxes. Still, we think that the backlog of arrears and

NPLs are a major impediment to recovery. To this end, we shall seek the

advice of our partners before legislating appropriately.

In exchange of the above commitment that the Greek government is prepared to

give during the period of the extension/bridge, our partners ought to agree that,

during the same period:

. There will be no measures that we consider recessionary such as pension

cuts or VAT hikes.

Regarding the specifics of the short term financing, or of the above

conditionalities, we believe that these technical issues can be resolved within a

day or two, as long as the political will is present. In any case, let me remind you

that we are talking about a short space of a few months of stability that is

necessary to establish the parameters of the longer term framework within which

Greece and Europe and the IMF will establish so as to put Greece on a

sustainable path.

The Greek authorities are determined to use these few months effectively, as

opposed simply to buying time for the purpose of doing little. We propose to

concentrate on a few reforms that are essential and which can be implemented

immediately, with the assistance of the institutions plus of the Organization of

Economic Cooperation and Development. Among them, we intend to:

. Cut the Gordian Knot of bureaucracy – through legislation that bans public

sector departments from asking of citizens or business information,

certificates or documents that the state possesses already (and which

reside in some other department)

. Tax authority reforms towards greater independence, propriety and

transparency

. Create an efficient and fair tax court system

. Modern bankruptcy system

. Judicial system reforms, in general

. Creating a competitive and sound electronic media environment that

enhances transparency and yields tax revenues for the state

. Dismantle the various cartels

Ladies and gentlemen, dear colleagues,

Unlike previous governments we shall not make promises which we know we

cannot fulfil. I could, for instance, placate everyone by accepting for example the

€5 billion privatisation target, so as to reach agreement. But I know that I cannot

deliver. Just like previous governments could not deliver in a marketplace of

collapsing asset prices.

Similarly with foreclosures of non-performing mortgages. Independently of our

ideological differences (and whether you agree with our government that family

homes should not be auctioned off in the midst of a depression on ethical

grounds), the fact remains that it would be non-sensical to throw hundreds of

thousands of families on the street at a time when there are no buyers and, as a

result, such foreclosures will yield no capital for the banks, will fuel the already

hideous humanitarian crisis and, in the end, destroy what is left of the real estate

market.

To recap, our government is ready and willing to apply for an extension of our

loan agreement till the end of August (or any other duration that Eurogroup may

deem fit), to agree on a number of sensible conditionalities for the duration of this

period and to commit to having a full review complete by the European

Commission at the end of this interim period – a period that will allow Greece and

its partners to design together a new Contract for Greece’s Prosperity and

Growth.

I trust that, despite any differences, our common ground is solid and such that we

can build upon it a mutually beneficial agreement in the spirit of true European

collegiality.

EUROGROUP MEETING – FEBRUARY 16, 2015 – BRUSSELS

NON-PAPER FROM THE GREEK GOVERNMENT

Technical discussion took place on Feb. 13-14 between Greek officials and

representatives from the EU Commission, the ECB and the IMF to identify

common ground between the two parties and discuss the content of the

current MoU.

On structural reforms, good progress was made to identify areas where the

Greek authorities can support the ongoing reform agenda: tax reform,

revenue administration reform, public financial management, fighting

corruption, e-government, public procurement reform, business climate

improvement, judicial system reform, implementation of EU legislation on

network industries and competitive sectors.

Time is needed over the coming weeks for the new government to make a

more detailed assessment of ongoing reforms. The Greek government is fully

committed to continue efforts made in these areas. It considers as an

essential part of its political mandate to accelerate implementation of decisive

policy actions the previous government failed to implement: decisively

confronting tax evaders, fighting corruption and reforming public

administration. It stands ready to commit to the short-term implementation of

key policy actions.

Technical discussions revealed real differences of logic on a limited number

of issues. The Greek government considers current labor market reform

agenda as unfit to the current situation of the economy. It will promote a

different approach, with technical assistance from ILO, to ensure workers’

protection in a way that is consistent with economic growth.

The government will also promote a different approach for managing public

assets. Privatizations will not be stopped but assessed on a case by case

basis to ensure that they are consistent with public interest. Fire sales must

be prevented, and a longer time horizon, in particular with respect to the

banking sector, must be considered.

On public administration reform, the government supports the goals to make

SoEs more efficient and establish a more efficient civil service but systematic

dismissals will end. On taxation, the government will review current policies to

protect the poorest segments of the population. It will review the brackets for

income tax to increase progressivity and replace the current property tax by a

wealth tax. VAT reform will be reviewed.

Finally, the Greek authorities identified some areas where there is a general

agreement on broad objectives but where they would like to discuss new

ideas to meet the policy goals of the MoU. On banking sector reform, the

authorities would like to discuss the creation of an Asset Management

Company to address NPLs. To support investment, the government considers

a priority to develop the social sector and create a public development bank.

On this basis, the Greek authorities consider that there exists sufficient

common grounds to constructively discuss with its European partners, on the

basis of fresh views and a forward looking approach, the terms of a new

commonly agreed policy agenda that will fully encapsulate the government’s

views. The government is committed to continue a reform agenda which

takes the best elements of the current program and of its own reform agenda.

These discussions should be held in an appropriate format that builds on the

ECB’s and EU Commission’s specific mandates.

The Greek authorities are committed to continued primary surpluses over the

next decade to ensure sound publics finances. However, implementing the

primary surplus targets envisaged by the MoU would be counterproductive. A

3% primary surplus in 2015 and 4.5% in 2016 would jeopardize the current

fragile recovery. Moreover, it is not at all necessary to put the debt on a

steady declining path. A 4.5% primary surplus would lead, according to our

projections, to extinguish entirely the debt by 2050. This is not the standard

definition of debt sustainability.

The current program sets the objective of a 124% nominal debt-to-GDP ratio

in 2020 to ensure sustainability and full market-access in 2023 when large

maturities will have to be refinanced. The authorities consider this target as

artificial and inappropriate. As stated by the Director General of the ESM in

2013, the structure of the Greek debt is as important as the debt-to-GDP ratio

to assess sustainability. Long term maturities and reduced interest rates

already entail a lower debt ratio in 2015 in net present value terms. In NPV

terms, the debt stands at 135% of GDP and would fall below the bar of 120%

if the same 1,5% primary surplus as in 2014 was achieved. The government

looks forward to discuss with the IMF and the other institutions a more

accurate assessment of debt sustainability.

Privatization receipts can contribute to improve the debt trajectory. However,

past commitments made by the previous Greek government fell short of the

targets. Quantitative objectives should be realistic. Forcing sales of public

assets in a depressed environment is unjustified. The authorities will stop all

sales that are not in the public interest.

Funding needs in the year 2015 and over the coming months is a pressing

and immediate concern.

Budget Balance

On the revenue side, the previous period was dominated by political

interventions, of varying intensity and from numerous sources that promoted

uncertainty and thus affected economic activity and tax collection. Revenue

shortfall as of end-January reached €2 billion compared to MoF forecast.

The authorities contemplate exceptional action in terms of revenue

mobilization in 2015. Up to €5.5bn are expected over the year thanks to a

strong effort to (i) fight illegal trading, tax evasion and corruption (ii) better

control transfer pricing in companies active abroad (iii) reform arrears

collection process and (iv) implement a more progressive taxation on the

wealthiest.

The authorities will look forward to maintain a 1.5% primary surplus over the

year. This objective depends on economic stabilization. New spending

(humanitarian package) will be financed through reprioritization of

expenditures and cuts in other budgetary items.

Debt Amortization

Greece faces exceptional funding needs in 2015. Payments to the IMF as

well as to the ECB and other creditors will amount to c. €17bn over the year.

Budget deficit itself, in cash term, will not add much to this figure, especially if

the SMP profits are incorporated in the government resources.

To cover all its refinancing needs, the government proposes to open

discussions with its European partners on the terms of a new contract that will

provide the appropriate framework for continued support from the ECB and

Member States. Technical work conducted with the three partner institutions

demonstrated that there is room for a new deal. The government is confident

that a fresh look at DSA will demonstrate that the objectives of the

government are on target. Once an agreement is reached on the desired

pattern of fiscal adjustment, the Greek government believes a holistic

agreement will be on reach on structural reforms.

Short Term Bridge Funding

To solve short run liquidity problems, the government foresees an agreement

on a combined involvement of the Eurosystem and its ELA program (in

relation to the issuance of T-bills), of the IMF through new disbursements and

of the Eurogroup for allowing the release of the unused HFSF resources.

We are confident that such an agreement can be reached on the basis of the

sufficient common grounds identified with the three institutions on the content

of the current MoU.

Annex 1: Privatization Receipts

The expected cumulative privatization proceeds are expected to reach

€22.3bn by 2020 according to the IMF. However, the Greek authorities

consider this target unrealistic.

Privatization Receipts have fallen Short of Expectations since 2011

In 2011, under the first program, the MoU agreed with the Eurogroup

expected €50 billion of privatization receipts over the period 2011-2016, with

a €5bn target for 2011, €10bn for 2012 and €5bn in 2013 (€20bn total receipts

at the end of 2013 and €35bn at the end of 2014).

In 2012, the second MoU stated that the €50bn target was maintained, but

over a much longer time horizon. The end-2020 target was revised down to

€22bn in April 2014 considering the “unsatisfactory privatization process”.

In practice, privatization proceeds amounted to €1.6bn in 2011, zero in 2012,

1bn in 2013 and were expected to reach 1.5bn in 2014 and 2.2bn in 2015.

These figures demonstrate the practical inability of privatizations to bring

sizeable resources to repay public debt in the current Greek context.

The New Government’s Intentions

The intentions of the new Government to halt the systematic approach to

privatizations will result in a shortfall over the short and medium run, but could

ultimately produce higher proceeds over the long run by avoiding fire sales

and/or asset disposals that are not in the interest of the Greek people.

This new attitude will inevitably deteriorate the debt sustainability over the

short run and prevent Greece to reach the arbitrary target of 124% of nominal

debt to GDP ratio by 2020, but it will with no doubt contribute to improve the

debt trajectory over the longer run.

Regarding financing needs, privatization receipts for the year 2015 were

estimated at €2,2bn by the IMF. The distribution of SMP profits for 2014

(€1,9bn) would allow to make up for most of this shortfall.

Annex 2: Debt Sustainability

Debt sustainability is about keeping the debt-to-GDP ratio under control. This

typically requires that the deficit is low enough to guarantee that the debt ratio is

falling rather than rising. To compute this threshold one needs to make

assumptions on growth. An economy with zero (nominal) growth needs a

balanced budget. With positive growth, some deficit is consistent with solvency;

all it takes is for the debt to grow less rapidly than GDP.

In the case of Greece, with a debt-to-GDP ratio at 175%, the deficit that would

stabilize the debt to GDP ratio at its current level is 7% of GDP (=4%*1.75)

assuming a conservative growth of 4% in nominal term. Greece has already

better performed since in 2014, the deficit fell under the Maastricht benchmark of

3%. In structural terms, correcting the measure of the deficit for the output gap,

Greece is actually engineering a fiscal surplus of 1.6% of GDP (according to

IMF).

In other words, a 3% deficit is well within the boundaries of sustainability as

conventionally defined. Given the interest bill, of about 3% of GDP today and

potentially of 4.5% in the future (once the interest deferral on EFSF loans

expires), a primary surplus of 1.5% is up to the task.

The attached simulation shows the downward debt trajectory until 2054

assuming a constant 1.5% of GDP primary surplus.

Discussion with the IMF over such DSA-style discussions would be critical. The

4.5% primary target is only required to bring debt below an arbitrary threshold of

124% by 2020 (according to the latest DSA) and below 120% in 2022. However,

the IMF does not take into account the adverse consequences on growth of the

austerity shock that is required to meet this fiscal target. Yet, GDP growth is as

important, and even more important, than the primary surplus to reduce the debt

to GDP ratio. Besides, any attempt to further squeeze the budget in the current

context of humanitarian crisis and slight resurgence of economic growth would

have a disastrous impact on both the economic and social fronts.

A Misunderstanding

The misunderstanding regarding Greece solvency owes to the fact that the blunt

175% Debt-to-GDP number does not fully describe the actual burden of public

debt over the Greek economy.

Greece currently owes the EFSF c. €142bn (75% of 2015 IMF projected GDP),

bearing an interest rate of c. 2.5%, and having a final maturity of 39yrs

(amortizing from year 2023 until year 2054). This high level of concessionality of

the EFSF loans is not captured in the nominal debt/GDP ratio used by the IMF in

the case of Greece. The same analysis can be made for GLF loans (interest rate

at 50bp above Euribor, i.e. currently 0.65%, and final maturity 2041).

In an interview in September 2013, head of ESM Klaus Regling strikingly stated

that DSA analyses undertaken by the IMF are “meaningless”. A key argument

from Regling is that the debt parameters are as important to assess debt

sustainability as the debt nominal level itself: EFSF loans are very long term, with

very concessional interest rate reduced to EFSF funding cost of approximately

2% plus an operational margin cost of c. 50bp.

Indeed, if Greece’s debt was calculated in NPV terms, say with a 5% discount

factor, the Debt-to-GDP ratio would already be as low as 133% of GDP (see

below), and reach 127% in 2020 (as expected by the IMF in nominal term) with a

primary surplus maintained at 1.5% of GDP instead of 4.5%.

We show below the debt-to-GDP ratio dynamics under the assumption of a

primary surplus maintained at 1.5% and conservative assumptions of nominal

growth at 4% (below IMF expectations).

Under this set of assumptions, the NPV of Public debt reaches 120% of GDP in

We show below the same dynamics under the assumption of a long term primary

surplus of 4% as requested by the EU. Under these unjustified assumptions, the

debt would dramatically decrease and totally disappear within the next 30 yrs,

which is not the definition of sustainability.

PRESS CONFERENCE STATEMENT BY YANIS VAROUFAKIS,

IMMEDIATELY AFTER THE EUROGROUP MEETING OF 16TH FEBRUARY

2015

I am pleased to report that the negotiations were conducted in a collegial spirit,

clearly revealing a unity of purpose – the purpose being to establish common

ground, over the next 4 to 6 months, so as to reach a meaningful, sustainable

new long term contract between Greece, official Europe and the IMF. Moreover, I

have no doubt that they will continue tomorrow and the day after until there is an

agreement.

So, if this is so, why have we not managed to agree on a communique, a simple

phrase, that will unlock immediately this period of deliberation?

The real reason concerns a substantial disagreement on whether the task ahead

is to complete a program that this government was elected to challenge the logic

of – or to sit down with our partners, with an open mind, and re-think this program

which, in our estimation, and in the estimation of most clear-thinking people, has

failed to stabilise Greece, has generated a major humanitarian crisis and has

made reforming Greece, which is absolutely essential, ever so hard. Remember:

a debt-deflationary spiral does not lend itself to successful reforms, of the form

that Greece needs in order to stop being dependent on loans from its partners

and from the institutions.

Last Wednesday, in the previous EG meeting, we turned down a pressing

demand to subscribe to “extending and successfully concluding the current

program”. As a result of that impasse, on the following afternoon (last Thursday,

and prior to the Summit) EG President Jeroen Dijsselbloem and Greek PM Alexis

Tsipras agreed on a joint communique to the effect that the two sides would

explore “common ground between the current program and the plans of the new

government for a New Contract with Europe.

It was a genuine breakthrough, bridging over the current program and the new

contract that we are seeking with our partners.

This afternoon there was another breakthrough. Prior to the Eurogroup meeting, I

met with Mr Moscovici, whom I want to thank for his highly positive role in this

process, who presented me with a draft communique (see Annex 3 below) which,

as I told him, I was happy to sign there and then – as it recognised the

humanitarian crisis, and spoke of an extension of the current loan agreement,

which could take the form of a [four-month] intermediate programme, as a

transitional stage to a new contract for growth for Greece, that will be deliberated

and concluded during this period. It also stated that the European Commission

would provide technical assistance to Greece to strengthen and accelerate the

implementation of reforms, effectively replacing the troika.

On the basis of this understanding between us and the Commission, we were

more than happy to apply for the loan agreement to be extended, while we

offered the following conditionalities:

. Reiterate its commitment to the terms of its loan agreement to all our

creditors

. Take no action that threatens to derail the existing budget framework or

that has implications for financial stability

Our only condition for the other side was that we should not be asked to impose

measures that are recessionary – such as pension cuts or VAT hikes.

Unfortunately, that fine document was replaced by the Eurogroup President,

minutes before the Eurogroup meeting, with another document that took us back

not even to last Thursday – but indeed to last Wednesday, when we were

pressurised to sign up to an extension not of the loan agreement but of the

programme itself, being offered only the nebulous two word phrase ‘some

flexibility’. When asked what that meant, we got no concrete answer. Did it mean

that, over the next few months, pensions would be cut but not as much as

originally prescribed? By none at all?

Under those circumstances, it proved impossible for the Greek government,

despite our infinite good will, to sign the offered communique.

And so the discussions continue. We are ready and willing to do whatever it

takes to reach an honourable agreement over the next few days. Our

government will accept all the conditions that it can deliver upon and which do

not reinforce our society’s long crisis.

No one has the right to work toward an impasse – especially one that is mutually

detrimental to the people of Europe.

Annex 3 (Junker-Moscovici draft here)

Annex 3 (Dijsselbloem draft here)

Παράρτημα I- Προσχέδιο Moscovici

15 Feb – close of business

Today, the Eurogroup took stock of the current situation in Greece, based on intensive

dialogue between the new Greek authorities and the Institutions.

The Greek authorities have expressed their commitment to a broader, socially just and

stronger reform process aimed at durably improving growth prospects. In particular, the

Hellenic Government commits to implementing long overdue reforms to tackle corruption

and tax evasion, and upgrade the public administration. It announced its intention to take

urgent action to ensure a fairer and more effective tax system and to contain the

humanitarian crisis. It will ensure that any new measures do not reverse existing

commitments and are fully funded. It will refrain from unilateral action and will work in

close agreement with its European and international partners.

Greece will fully respect its commitments to partners to ensure sound and sustainable

public finances, by reaching and then sustaining sizeable primary balances. The

feasibility of reaching the fiscal target for 2015 will be considered in light of evolving

economic circumstances. Measures for reducing the debt burden and achieving a further

credible and sustainable reduction of the Greek debt-to-GDP ratio should be considered

in line with the commitment of the Eurogroup in November 2012.

At the same time, the Greek authorities reiterated their unequivocal commitment to the

financial obligations to all their creditors.

The above forms a basis for an extension of the current loan agreement, which could

take the form of a [four-month] intermediate programme, as a transitional stage to a new

contract for growth for Greece, that will be deliberated and concluded during this period.

When considered useful, the European Commission will provide technical assistance to

Greece to strengthen and accelerate the implementation of reforms.

The Eurogroup invites the Institutions to continue technical work with the Greek

authorities, including to identify intermediate financing needs, how they will be covered

and the appropriate conditionalities. The Institutions will report to the Eurogroup by [21]

February.

Παράρτημα ΙΙ- Προσχέδιο Dijsselbloem

16 February 2015 [14:45]

Preliminary and confidential

[Draft] Eurogroup statement on Greece

The Eurogroup reiterates its appreciation for the remarkable adjustment efforts

undertaken by Greece a