As the political confrontation between the government and main opposition New Democracy grows more intense, with an eye to the next elections, Greece’s European creditors are piling up measures and commitments which the government must legislate and which will bind the country until 2022.
Measures that will affect pensioners and all households will be pushed through parliament gradually, until the end of the bailout programme in August. They constitute the precondition for any final decisions on much-awaited debt relief measures.
Though Eurozone finance ministers on 24 May agreed to take those final decisions at their next meeting on 21 June, the complication of the political turmoil in Italy has stirred fears in Athens that plans for a smooth return to the markets may be upset.
The government fears that the ECB and Germany may pressure it to accept a 12-month precautionary credit line, which it has vehemently and repeatedly rejected.
On the other hand, the IMF and France believe the solution is substantial debt relief measures, which would render a credit line unnecessary.
To that end, the government accepted quarterly reviews by creditors, and is prepared to accept Germany’s conditions for debt relief.
The European creditors may decide that the return to Athens of profits from Greek bonds may come in instalments, and be linked to progress in the privatisation programme.
What is considered positive is that the Eurogroup asked lending institutions to prepare a debt sustainability analysis (DSA), which will be the basis for final debt relief decisions. Essentially, a number of DSAs will be prepared to reflect all the scenarios and proposals that have been tabled.
As for the post-bailout period, the handouts that the government is preparing to offer with whatever primary surplus is accrued above 3.5 percent of GDP will have to be approved by European creditors and the IMF.
According to the supplementary memorandum that the government recently signed, lending institutions will have a say about even the model of firings in private education, and about the transfer of funds from the general government to Bank of Greece accounts.
Lenders will also supervise implementation of the privatisation programme and the completion of the cadastre in coming years.
The government’s commitments will be included in a new, medium-term programme (2019-2022), which will be tabled in parliament on 15 June, along with an omnibus law legislating all remaining conditions for exiting the bailout programme.
Zois Tsolis
