Fenech: EU 'not throwing money' at Greek problem

Finance minister, Tonio Fenech reported to Parliament on the Greek bailout agreed by EU finance ministers earlier this week. During this evening's Parliamentary session, Fenech explained the implications of the second bailout and replied to questions forwarded by the Opposition.

Opposition MPs Charles Mangion and Karemnu Vella expressed their support and agreement to the deal agreed by EU finance ministers. However they asked whether the €130 billion which will be loaned to Greece will be used to pay off debts with banks and financial institutions or aid the Greek government in order to achieve economic growth.

Vella also asked how "confident" the Maltese government is about Greece's ability to reduce its debt to 120% of GDP from 160% by 2020.

In his reply finance minister, Tonio Fenech said that the bailout was only agreed after making sure that the Greek government introduces a number of reforms to make its economy sustainable.

Fenech reassured the Opposition that Malta participated in all meetings and raised various points including the need of assurances that the bailout will not result in losses for eurozone members and that the Greek government will introduce necessary reforms to restructure its economy.

"The agreement does not only impose austerity measures on Greece but will also help the Greek government to carry out the necessary reforms to reach economic stability."

On where the money will go, Fenech said that banks and financial institutions have agreed to take a cut of 75% on the debt repayments. "The bailout money will not be used to pay off debts Greece has with banks but will fund the annual government budget."

Fenech explained that the EU is not just "throwing money to the problem" but aims at helping Greece achieve stability because "the crisis in Greece is affecting the rest of Europe." He said that the recent downgrade of eurozone countries by credit agencies is down to the Greek crisis.

"The solution must be permanent. Greece must not only reduce its expenditure but it has to carry out a detailed plan to reform its structures and economy," Fenech said.

On the timeframe of the reforms, Fenech explained that the agreed plan demands Greece to immediately carry out the reforms within the coming weeks and months.

Among the reforms that Greece must undertake, the finance minister mentioned the need to liberalise markets, abolish monopolies, remove state subsidies and privatise vital sectors of the economy such as transport, communications, banks, airports and energy.

"Private enterprise will contribute to the public coffers and aid economic growth. The privatisation of vital sectors will increase efficiency," Fenech said.

He also added that Greece must invest in the manufacturing sector and liberalise its ports, invest in research and development and put into place better regulations. "If Greece couples these reforms with better use of EU funds then it will be on the right track to achieve economic growth."  

Greece will hold fresh elections in April and eurozone members feared that a change in administration could destabilise the agreement reached.

Speaking about the concerns raised by the Opposition on the political commitment of a future Greek government, Fenech explained that the current technical government enjoys the confidence of the eurozone ministers and the agreement was only reached after assurances on the continuity of the reform programme were given. He added that the current agreement binds Greek political parties to maintain the reforms beyond April.

He played down fears that the new political government will be led by splinter parties who oppose the austerity measures and reforms. Fenech explained that recent polls indicate that the major political parties who agreed with the plan enjoy substantial leads and the Greek electoral system awards the party which gains the majority of votes, even if relative, 50 extra seats. "The remote possibility of smaller parties gaining power convinced the eurozone members to approve the agreement," Fenech said.

Fenech added that a surveillance programme will be set up in the form of a Troika which is made up of the EU commission, the International Monetary Fund and the European Central Bank. "Additionally EU experts will oversee and report on the progress achieved and provide technical expertise to carry out the reforms."

On the first bailout granted to Greece in 2010, worth €110 billion, Fenech said that Malta has sledged 1.5% off the interest rate but maintained that Malta will still make a "marginal gain" once Greece repays the loan.