Home > Uncategorized > The new Greek MoU – Annotated by Y. Varoufakis

The new Greek MoU – Annotated by Y. Varoufakis

During the ‘months of fruitless negotiating’ Varoufakis was one of the few reasonable, levelheaded, well informed and realistic, fact based personalities. I.e.: a heretic. About the third, somewhat Orwellian, Memorandum of Understanding he states on his blog: “Written in troika-speak it is almost impossible to decypher by those not speaking this unappetising language. Click here for the complete MoU text annotated liberally by yours truly.” An excerpt (one link removed, annotations between square brackets, great education resource):


Memorandum of Understanding for a three-year ESM programme

1. Outlook and strategy
Greece has requested support from its European partners, to restore sustainable growth, create jobs, reduce inequalities, and address the risks to its own financial stability and to that of the euro area. This Memorandum of Understanding (MoU) has been prepared in response to a request of 8 July 2015 from the Hellenic Republic to the Chairperson of the Board of Governors of the European Stability Mechanism (ESM) for stability support in the form of a loan with an availability period of three years. In accordance with Article 13(3) of the ESM Treaty, it details the conditionality attached to the financial assistance facility covering the period 2015-18. [Of course the real ‘story’ is that this MoU was prepared to reflect the Greek government’s humiliating capitulation of 12th July, under threat of Grexit put to PM Tsipras by the EuroSummit. …]. The conditionality will be updated on a quarterly basis… [i.e the Greek government will be constantly engaged in the troika process, starting a new ‘review’ just as the previous one ends]…taking into account the progress in reforms achieved over the previous quarter. In each review the specific policy measures and other instruments to achieve these broad objectives outlined here will be fully specified in detail and timeline. Success requires ownership of the reform agenda programme by the Greek authorities. The Government therefore stands ready to take any measures that may become appropriate for this purpose as circumstances change. The Government commits to consult and agree with the European Commission, the European Central Bank and the International Monetary Fund on all actions relevant for the achievement of the objectives of the Memorandum of Understanding before these are finalized and legally adopted. [This is astonishing: A government commits to agreeing with the troika, even if it does not agree! Of course the opposite does not apply: the troika does not commit to “consulting and agreeing with the Greek government”. Note too that the troika considers all legislation to be subject to its approval, including laws on higher education etc. Greek sovereignty is being forfeited wholesale.]. The recovery strategy takes into account the need for social justice and fairness, both across and within generations. Fiscal constraints have imposed hard choices, and it is therefore important that the burden of adjustment is borne by all parts of society and taking into account the ability to pay. Priority has been placed on actions to tackle tax evasion [as long as it is not committed by the oligarchs in full support of the troika through their multifarious activities, including the bankrupt media that they full own], fraud and strategic defaulters, as these impose a burden on the honest citizens and companies who pay their taxes and loans on time. Product market reforms seek to eliminate the rents accruing to vested interest groups [as long as they are not the large scale rent seekers, who are to be fully protected and, indeed, assisted through the creation of conditions encouraging greater market concentration and large chain stores; e.g. the legislation that targets family owned pharmacies, granting licences to nonpharmacists to bring multinationals like CVS and Boots into the market]: through higher prices, these undermine the disposable income of consumers and harm the competitiveness of companies. Pension reforms have focussed on measures to remove exemptions and end early-retirement. To get people back to work and prevent the entrenching of long-term unemployment, the authorities, working closely with European partners, will initiate measures to boost employment by 50.000 people targeting the long-term unemployed [to be achieved, given the non-provision of additional resources, through some magic formula not mentioned here]. A fairer society will require that Greece improves the design of its welfare system, so that there is a genuine social safety net which targets scarce resources at those who need it most [to be achieved without a single new euro again by some magic formula yet to be invented]. The authorities plan to benefit from available technical assistance from international organisations on measures to provide access to health care for all (including the uninsured) [i.e. using advice of well paid foreign “technocrats” as a substitute for funding, nurses, doctors and equipment] and to roll out a basic social safety net in the form of a Guaranteed Minimum Income (GMI) [which would be great, except that not one fresh euro will be made available for the GMI program whose funding will be siphoned off existing benefits provided by the Greek state, e.g. child benefit]. Implementation of the reform agenda will provide the basis for a sustainable recovery, and the policies are built around four pillars:
• Restoring fiscal sustainability (section 2): Greece will target a medium-term primary surplus of 3.5% of GDP to be achieved through a combination of upfront parametric fiscal reforms, including to its VAT and pension system, supported by an ambitious programme to strengthen tax compliance and public financial management, and fight tax evasion, while ensuring adequate protection of vulnerable groups. [In other words, even greater austerity than before awaits the social economy with the greatest recession due to the harshest austerity – guaranteeing that no sane investor will invest in productive capacity since, according to this MoU, the recession will end, at the earliest, in 2017 and then, in the following year, the brakes will be slammed on as the government hikes taxes and reducing spending further to attain the unattainable 3.5% primary surplus.]
• Safeguarding financial stability (section 3): Greece will immediately take steps to tackle Non-Performing Loans (NPLs). A recapitalisation process of banks should be completed before the end of 2015, which will be accompanied by concomitant measures to strengthen the governance of the Hellenic Financial Stability Fund (HFSF) and of banks. [Banks were already recapitalised in 2013 but failed to provide credit because no bad bank was instituted to manage the mountainous NPLs – incredibly the same failure is being designed into this new MoU. Another large sum for the banks but no bad bank plan for dealing with the NPLs.]
• Growth, competitiveness and investment (section 4): Greece will design and implement a wide range of reforms in labour markets and product markets (including energy) that not only ensure full compliance with EU requirements, but which also aim at achieving European best practices. [French or Latvian “best practices”?] There will be an ambitious privatisation programme, and policies which support investment. [Even the IMF, in its Economic Outlook Spring 2015, see Chapter 3, disputes that privatisations support investment and growth.]

  1. August 18, 2015 at 12:21 am

    Bring in all Greeks who worked producing the Drachma (pre-euro), start planning for the return, and get on with the inevitable.

  2. August 19, 2015 at 1:50 pm

    Of course, one day, Greece will be obliged to remove U.E. It wil not be any crash, if they dot it slowly in 3 times.

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