'Greek tragedy not yet over' - Muscat tells parliament

The deal reached between Greece and its creditors on Monday morning in the longest EU summit ever is not the final solution, Prime Minister Joseph Muscat said.

“This was a very important meeting, at times even dramatic. But I don’t think that we can safely think that a final solution has been found. There are numerous measures which Greece must undertake for member states to agree for the opening of negotiations for a third bailout,” Muscat said.

Briefing parliament on Tuesday evening, the Prime Minister said everything will now depend on how much the Greek government will stick to the deal.

“The road is indeed long but an important agreement was reached that secured Greece’s position within the euro area. The deal also protects the interest of member states, Malta included, while retaining the unity in the European project.”

Muscat said Greece had come back with a proposal identical to what the European Commission had proposed two weeks before.

“It couldn’t be accepted. Time waits for no one and the situation in Greece deteriorated. What was good before the referendum could no longer be applied. Unfortunately, tougher proposals had to be put forward.”

The Prime Minister said the final result saw Greece facing a tougher deal. The key points of the Greek agreement include the transfer of up to €50 billion worth of Greek assets to a new fund, which will contribute to the recapitalisation of the country’s banks.

Muscat praised Malta’s Parliament for accepting its contribution to the Greek bailout unanimously and for maintaining the same stance on the issue ever stance, arguing that it is a reflection of “true Europeanism”.

“Our mandate heading into the negotiations was that we were against a haircut on Greece’s debt and that we insisted that Greece prove that it is able to repay its obligations,”

He said that the Greek government’s erratic behaviour in recent months resulted in them having to accept a deal that was “too harsh”.

“There would have been nothing wrong had Tsipras called a referendum before their IMF loan expired,” he said. “Instead, he left Europe negotiating and called a referendum a few hours after saying that he was going to propose a deal. When I switched on the TV and found out, I wondered whether he was being serious or not.”

He argued that such unpredictability had severely damaged his credibility and had resulted in the Eurozone having to propose micro-legislations, such as Greek supermarkets having to be allowed to sell pharmaceuticals over the counter, in the final agreement.

“They had to be given such micro-details, or else they’d have done nothing,” Muscat said. “That’s where the humiliation kicked in.”

On the controversial fund, he said that the final proposal is much better than the original one. “However, once you’ve won in negotiations, there’s no need to continue negotiating. At the end of the day, Greece is still an EU member state.

Responding to a question by Opposition MP Kristy Debono, Muscat welcomed the controversial agreement to set up a prvitisation fund to which Greece will transfer some €50 billion of its assets.

“This way, Greece’s creditors can ensure that the money it gains from privitisation will be used to repay back their debt and recapitalize their banks, and not on other purposes,” Muscat said, adding that the original proposal to base the fund in Luxembourg would have been “a step too far”.

He brushed off fears raised by Opposition MP Robert Arrigo relating to Bank of Valletta’s financial status, in the light of unsecured loans recently granted by the bank to Air Malta, pointing out that all Maltese banks recently passed European stress tests.

He recounted how Malta’s exposure to Greece stood at 3.2% of its GDP when the second bailout was approved, one of the highest rates in Europe along with Germany.

“It has now plummeted to 2.1%, thanks to recent economic growth,” he said.

Muscat appealed against a narrow-minded portrayal of Germany and Greece, arguing that the two countries remain “essential” European partners who were justifiably trying to protect their own national interests.

“Calling the Germans dictators and tyrants and the Greeks bummers will get us nowhere,” Muscat said, recounting how the Maltese delegation, in the spirit of “true Europeanism” both helped Greece and criticised them throughout the course of the negotiations, according to the situation.”

By tomorrow, Greece needs to pass measures to “improve long-term sustainability of the pension system”. It also must legislate on changes to the VAT system, reassurance on the independence of its statistical agency and the implementation of a system which would see Greece automatically implementing spending cuts if budgetary goals are not met.

By next week Greece must then legislate on a reform of the civil code and the transposition of the Bank Resolution and Recovery Directive.

Only after these measures are passed by the Greek parliament will the Eurogroup make its recommendation to the European Stability Mechanism to start negotiations on a memorandum of understanding with Greece that would land it the €86 billion bailout.

Moreover, the Greek government must roll back legislations which go against the previous bailout programme or compensate for it.

Greece must also develop a significantly scaled up privatisation programme with improved governance; valuable Greek assets will be transferred to an independent fund that will monetize the assets through privatisations and other means. The monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of €50bn of which €25bn will be used for the repayment of recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of €25bn) will be used for decreasing the debt to GDP ratio and the remaining 50% will be used for investments.

“It was crucial to ensure that no haircuts are agreed. It was clear that several member states, Malta included, were not going to accept any reductions,” Muscat said.

PN deputy leader Mario de Marco cast doubt on whether Greece will be able to fork out €4.2 billion which it owes to the European Central Bank, by the 20 July deadline.

“This won’t be the last we’ve heard of the Greek debt crisis and a deal still hinges on whether Greece is going to be able to implement what it has promised,” he said.

De Marco said the Opposition had supported the government’s position throughout the Greek debt crisis, a point which was later lauded by the Prime Minister “for the cooperation shown by the two sides”. The Opposition, like the government, insisted that no haircuts should be agreed to.

De Marco commented that these weren’t days of celebration, and some believe that Greece was humiliated or allowed itself to be humiliated: “However, others say that Tsipras himself contributed to the humiliation that Greece has passed
through.”

He also argued that the Greek government’s credibility took a severe knock due to “its behavior” over the past few weeks.