ESM: MoU hasn’t run out – Greek govt: No, it ended with the election

The Greek government and the ESM statements in a veritable tug-of-war

Back-and-forth statements between Greece’s lenders and the new leftist government have turned into a proverbial tug-of-war.


While the Greek side insists on clarifying that the Memorandum is over, ESM Managing Director Klaus Regling tried to bring the former back to reality, saying that the “Memorandum has not ended, nor has it been suspended by the loan agreement”.


The Greek Master Financial Assistance Facility Agreement (MFFA) is a legal contract between the European Financial Stability Facility (EFSF), the Greek government, the Greek central bank, and the Hellenic Financial Stability Fund (HFSF), which is Greece’s national bank recapitalisation fund. It specifies the terms and conditions of the financial assistance to Greece, regarding e.g. the loan amount, availability period, fees, interest and repayment. It is signed by the EFSF CEO and the Greek Finance Minister.


The provision of financial assistance under the MFFA is conditional upon Greece’s compliance with policy reform measures set out in the Memorandum of Understanding (MoU), which was agreed by Greece, the European Commission, and the ECB. The MoU is a separate and self-standing document, but is linked to the MFFA- no disbursement can be made without MoU compliance, which is assessed by the institutions.

The Greek MFFA originally expired on 31 December 2014. But on 19 December 2014, the EFSF Board of Directors decided to grant a technical extension until 28 February 2015. On 27 February 2015 the EFSF Board of Directors decided to further extend the Greek MFFA by four months until 30 June 2015.

In addition, it should be noted that the MoU is a document that is often updated when a review takes place, potentially reflecting new circumstances and the need to adapt the list of policy measures to be implemented. The MoU (unlike the MFFA) did not have to be extended because it has no termination date.


The Greek government’s answer was:


“The Greek Memoranda ended on the 25th of January[…] It would be prudent for EFSF officials to be informed on the tough negotiations of the three successive Eurogroup meetings. It is not by chance that the final Eurogroup announcement of a deal does not include any words pertaining to Memoranda”.