Yet another crucial week for the current Greek program – the third bailout since 2010 -- begins anew on Monday, with only days left for Athens to achieve a timely second review – a milestone which itself is now considered as imperative for the commencement of talks for debt relief.
Given that creditors’ official negotiators left the Greek capital last week, as scheduled, but with several open issues left unresolved to conclude the second review of the Greek program, the next step is a teleconference and continued “distance negotiations”.
Labor sector liberalization and fiscal issues are the foremost unresolved issues, a situation widely reported, analyzed and cited since the first review was finally concluded after repeated delays last May.
A EWG conference is scheduled for Monday (after the teleconference), a venue where whatever progress towards reaching the “finish line” for the second review will be presented.
Nevertheless, the main target date is the Dec. 5 Eurogroup meeting, where the leftist Greek government hopes to both close out the second review and open discussions for debt relief – even in the face of standing German opposition to the prospect before 2018.
In putting a more positive “spin” in the wake of creditors’ departure from Athens and subsequent contacts, government sources in the Greek capital maintained that progress has been recorded on creditors’ belief that a fiscal “gap” of 600 million euros will materialize in the 2018 budget.
No information was given, however, as to how the sources qualify “progress”, i.e. if creditors are backing down from their forecast and thus abandoning a demand for more austerity measures, or, if the Greek government is considering measures to cover the “gap” -- even at levels of less than 600 million euros.
The same sources pointed to a “convergence” on energy-related issues, whereas differences on labor sector reforms remain. One of the more politically charged labor reforms demanded – especially by the IMF – and opposed by Athens is the prospect of eliminating the relevant labor minister’s veto on mass layoffs.
In the broader picture, Athens is expected to seek a “political solution” for a series of pending issues, especially over primary budget surplus targets after 2019 (months after the third bailout ends) -- a prospect that has surfaced from repeated statements by Greek officials this month.
Next up, assuming this plan goes as desired, is the tabling of a memorandum-mandated medium-term program in Parliament, all of which make it improbable that all outstanding issues will be resolved by the Dec. 5 Eurogroup session.
The solution, if past practice serves as a guide, is a formula used last May, at the height of uncertainty and uneasiness before the first review was achieved. Specifically, “prior actions” or milestones will be divided up and their fulfillment will be linked to “rewards” for the Greek side: short-term debt measures, disbursement of a portion of bailout loans cited in the second review etc.
Contacts between Athens and creditors shouldn’t be a problem however before the Eurogroup meeting next week, as EU Commissioner Pierre Moscovici will be in the Greek capital on Monday to participate in an economic conference, as will several top representatives of institutional creditors (Commission, ECB, SSM and IMF).
