Greece’s European creditors have circulated a draft MoU that refers to “additional austerity steps” in case the Greek government fails to meet memorandum-mandated targets until 2018, namely, primary budget surplus goals, Bloomberg reported on Saturday.
Greece’s European creditors have circulated a draft MoU that refers to “additional austerity steps” in case the Greek government fails to meet memorandum-mandated targets until 2018, namely, primary budget surplus goals, Bloomberg reported on Saturday.
The report more-or-less confirms the now unified stance amongst creditors to adopt an IMF demand that Athens legislate a “contingency package” of measures worth 3.6 billion euros – on top of a 5.4-billion-euro package already envisioned.
Bloomberg said the measures will equal the degree by which the targets are missed, “as much as 2 percent of GDP”.
The report comes amid a crucial Eurogroup meeting on Monday, an extraordinary session convened with the sole purpose of reviewing the Greek program.
Creditors, particularly the IMF, want the contingency package to kick in with automatic spending cuts and taxes if targets are missed.
The leftist Greek government has claimed that Greek law does not allow for the legislation of contingency measures, while also indirectly saying that it cannot pass the measures on the political level.
According to reports, one passage states:
"Αs a prior action, legislation will be adopted to ensure that a package of measures would be automatically implemented in the event a failure to meet the annual primary surplus targets in the programme: this is a means to provide additional assurance to reach the primary surplus target of 3.5 percent of GDP in 2018. This legislation will ensure that that contingent assurance is automatic, objective and credible. Measures would be triggered automatically in the event of a negative difference between the target of the ESM programme for the year t-1 and the actual outcome, as objectively identified by ELSTAT in April on the basis of preliminary outturn data - validated by ESTAT in the context of the procedure of fiscal notification - modified by programme adjustors. On this basis, an adjustment will be undertaken equal to the negative deviation from the target, up to the size of 2 percent of GDP. To provide credible contingent assurance, the legislation will provide for the possibility to automatically reduce non-discretionary expenditure, as well as the corresponding claims and selected discretionary expenditure, and also to increase, whilst respecting the Greek Consitution, direct and indirect tax revenues. The fiscal adjustment measures provided for in the mechanism shall lead to a permanent correction in the gap. It will include a clause to cater for exceptional adverse developments that can be activated only in agreement with the European institutions".