In a new report, the Greek Parliament Budget Office describes the economy’s third quarter as “a three-month period of normalisation of ties with the institutions [Greece’s creditors], including the IMF, that creates the prospect for a return to the markets”.
The report, signed by budget office director Panagiotis Liargovas, suggests that the improved ties began with the second evaluation of the fiscal programme in June, with the submission of the Medium-Term Fiscal Adjustment Programme (2018-2021), and it outlines the course of economic and social policy over the coming years.
It notes that this normalisation may turn out to be fleeting if there are difficulties with the implementation of agreements.
With the current bailout memorandum ending in August, 2018, the government’s aim is to achieve a “clean return to markets”, without further inter-state aid from the EMS. If that happens, it will signal the end of the deep, long-term supervision of the memorandums, and it will open the way to a debt reprofiling.
The government says it wants to close the next, third evaluation by year’s end, so that the programme may be implemented smoothly. At the same time the country has exited the EU’s excessive deficit procedure.
In addition, the performance of Greek 10-year-bonds in the third quarter of 2017 followed a downward trend. When Greece issued a bond in July, the return on the ten-year bond was the lowest in recent years (5.33 percent). Yet there is concern over the fact that the return on the ten-year bonds is considerable higher than other countries of the south (Italy, Spain, and Portugal).
The return to the markets, even if all goes well, does not spell an end to the limits on fiscal sovereignty that Eurozone countries face. Moreover, a prospective emergency credit line, and even more so a debt reprofiling, will be accompanied by fiscal oversight.
Growth of 1.8 percent
The report notes that Greece’s short-term development prospects have improved and that the country is beginning to exit the crisis. The government predicts that in 2017 it will return to a positive growth rate of 1.8 percent, and of 2.4 percent for 2018.
