The Greek government on Saturday scrambled to find a compromise to institutional lenders’ demand for a contingency package in case current measures don’t reach primary budget surplus targets through 2018.
By Dimitris Hatzinikolas
The Greek government on Saturday scrambled to find a compromise to institutional lenders’ demand for a contingency package in case current measures don’t reach primary budget surplus targets through 2018.
According to reports, the Council for Fiscal Policy, an independent agency established at the insistence of creditors in 2014 but mostly inactive until its responsibilities were determined just last August, will be the government’s alternative for a mechanism to monitor the course of the Greek economy and possibly activate contingency measures if necessary, a demand by the IMF.
The latest “hiccup” in still ongoing negotiations between Athens and lenders, the so-called “Quartet”, is the IMF’s position that primary budget surpluses, as a percentage of GDP, will not be met with the currently proposed “basket” of tax hikes and supplementary pension cuts. A primary budget surplus goal for 2018 is 3.5 percent of GDP, with the total package now reaching 5.4 billion euros in savings for state coffers, i.e. indirect and direct tax increases and spending cuts, primarily in social security.
In statements on Friday after the end of the Eurogroup meeting in Amsterdam, Eurogroup chairman Jeroen Dijsselbloem said "we came to the conclusion that the policy package should include a contingent package of additional measures that would be implemented only if necessary to reach the primary surplus target for 2018."
Friday, April 22, had been cited over the past two months as a date for concluding the first review of the Greek program (third bailout), with May 1 now the next apparent deadline.
He added that contingency measures must be "credible, legislated up-front, automatic and based on objective factors."
The “legislated up-front” comes in the face of reluctance by the leftist government, as enunciated the same evening by Greek Finance Minister Euclid Tsakalotos, namely, that there is no provision in Greek law for passing “contingency legislation”.
Saturday’s "leaked" proposal for assigning the Council for Fiscal Policy the task is viewed as the Greek government's answer to avoiding legislation, while at the same time thrusting forth an institutional entity in order to add the needed “credibility”, as the government sources said, demanded by creditors.
The negative development for the Tsipras government means it has to scramble to find alternatives to the creditors’ demand for contingency measures – a position mostly pressed by the IMF – in order to overcome yet another obstacle in closing negotiations and achieving a first review. Additionally, on the domestic front, increasingly shrill criticism of a “fourth memorandum” emerged on Saturday across social media, given that mainstream electronic and print mass media were offline the previous 48 hours due to a strike by a journalists’ union.
Tsakalotos’ statement on Friday of an inability to legislate "contingent measures" was countered by Dijsselbloem’s comment that a way would be found.
"We need to work on how that mechanism is going to look like. Of course, if there are legal constraints we can't and won't break legal constraints. We will design it in a way that delivers credibility ...and (is) legally possible," Dijsselbloem told reporters.
The figure for such a contingency package is an additional 2 percent of GDP in revenue generation or spending cuts.