By G. Palaitsakis
A continuing delay to finally conclude the second review of the Greek program (third bailout) -- through negotiations between the leftist government and institutional creditors -- is expected to have negative repercussions on the course of the still recession-plagued Greek economy.
The continuing delay comes in the face of very ambitious forecasts for the economy in 2017, i.e. up to 2.7 percent in higher GDP for the year. The latter is a "cornerstone" of the ongoing economic adjustment program (third bailout).
In tandem with a high growth rate forecast -- by Greek standards -- is a fiscal target for a primary budget surplus of 2 percent of GDP in 2017, rising to the highly ambitious 3.5 percent of GDP.
One major and now well-documented obstacle in concluding the second review is the IMF's purported insistence on additional measures over the 2018-2020 period worth 4.5 billion euros in order to meet those fiscal targets -- ones mostly demanded by European creditors. The current bailout ends in August 2018.
The embattled leftist government in Athens, however, has repeatedly refused to consider more austerity measures, simply proposing the extension of an automatic spending cuts mechanism to ensure that fiscal targets are met. Nevertheless, the Greek side has not detailed what measures will be taken in case fiscal targets appear fleeting.
The "Rubik's Cube" now entailed in the Greek bailout witnessed yet another "twist" last week with the prospect of the IMF deciding not to participate in the adjustment program -- something that Athens apparently welcomes, at least in public statements.
However, a high-profile statement on the issue by powerful German Finance Minister Wolfgang Schaeuble, who said that a possible IMF departure from Greece's "quartet" of institutional creditors will mean an even stricter program, more-or-less shocked the leftist Tsipras government.
