The basic parameters of the agreement reached between the Greek government and the four institutions are outlined in an official document, which stresses that the “mild adjustment” allows for growth.
According to the statement, the fiscal target for 2015 is a 0.25 primary deficit, followed by primary surpluses of 0.50% for 2016, 1.75% for 2017 and 3.5% for 2018. The document contrasts these divs with the previous government’s agreement, which provided primary surpluses of 3% for 2015, 4.5% for 2016 and 2017 and 4.2% for 2018.
As such, the government claims that the reduced primary surpluses will mean that it avoid having to take measures worth 11% of the GDP, which estimated to be about 20 billion euros. The new agreement will also be covered by the International European law, as opposed to British law that was agreed upon by the New Democracy/PASOK coalition government.
Furthermore, there is no risk of a deposit “haircut”, as the banks will be recapitalized by the end of 2015 and will receive “at least” 10 billion euros. The agreement also stipulates that non-performing loans cannot be sold on to other companies, while protection from foreclosure to primary residences will continue to be provided until the end of the year. Government efforts and initiatives in coordination with the institutions will aim to settle these loans in autumn. The agreement also includes provisions for a 35-billion-euro growth package, also known as the “Juncker package”.
The independent power transmission operator ADMIE will remain in public hands, while the agreement has no references to the “mini DEI” that was initially to split from the state electrical company to be privatized. Nevertheless, the agreement includes provisions for the deregulation of the natural gas market, in accordance with EU legislation. Regarding reforms in the labor market, the government explained that legislative initiatives will be planned following consultations with the International Labor Office. The government claims that new privatization fund will not sell off public assets, like TAIPED did, but rather take advantage and develop them.
Finally the government professes that the measures provided in the new agreement are similar to ones included in the previous government’s agreement that was never implement, albeit with “many improvements”. The old agreement required the completion of the 5th program review to secure 4 billion euros worth of funding. These measures were later proposed at the Eurogroup on the 25th of June in exchange for a five-month program extension and 7 billion euros in funding. Ultimately though, following negotiations and many improvements, Greece’s financing needs over the next three year will be covered, with about 85 billion euros worth of funding.
