By Nikos Bellos
[email protected]
Fiscal targets, labor sector liberalization, and energy-related reforms, particularly issues revolving around the dominant electricity provider in the country, state-run Public Power Corp. (PPC), have emphatically emerged as the remaining obstacles to concluding a second review of the Greek program (third bailout).
EU officials in Brussels have acknowledged the remaining obstacles but have also cited progress in negotiations so far, while encouraging the leftist Greek government to accelerate its pace and not to lose whatever momentum has been gained towards a satisfactory and comprehensive agreement -- with the prospect of (short-term) debt relief dangling as a reward.
Although the leftist Greek government wants to resolve whatever "open issues" over the next few days in order to achieve an agreement at the Dec. 5 Eurogroup meeting, a new round of negotiations will have to be conducted by teleconferencing, given that creditors' representatives have already departed Athens. Beyond the time constraints and "distance contacts", substantive differences remain over major issues.
Reactions so far in Brussels are discreet, not because EU officials believe an agreement is unattainable, but because they consider that negotiations are in the final stages, whereby neither overt enthusiasm or shades of pessimism are conducive.
Nevertheless, previous statements citing an agreement by Dec. 5 have become more flexible, with the entire month of December, prior to the Christmas holidays, now cited as the goal for concluding the second review. In case the review is not concluded by the Dec. 5 Eurogroup, an extraordinary session of the body will have to be convened.
In terms of the substance of remaining differences, creditors have repeatedly pointed to a "gap" of 500 to 600 million euros for the 2018 budget, which must post a very ambitious 3.5-percent primary budget surplus as a percentage of GDP -- as per a memorandum obligation.
Creditors consider that there is little concern over 2017 fiscal projections.
The "calculus" for finding a compromise on this difference includes the level of primary budget surplus targets for after 2018 -- when the current program ends -- something that creditors' representatives did not discuss with the Greek side in recent negotiations, given that they did not have a mandate to broach the issue.
Fiscal targets after 2018 are considered an issue to be decided at the Eurozone finance ministers' level.
On this particular matter, the IMF looms as an ally of the Greek side, given that the Fund has maintained that the fiscal targets are too high. Conversely, more austerity measures will be needed to reach the goals.
In terms of the thorny issue of labor sector liberalization, where the IMF is viewed as the strictest of the creditors, a EU source in Brussels merely confirmed numerous reports out of Athens, namely, that the Greek side's insistence on reviving collective bargaining between social partners, as well as its opposition to loosening the regime governing mass layoffs, are the main obstacles.
Finally, on the equally complicated sphere of energy sector reforms, creditors want a complete liberalization of the regime governing NOME-type electricity auctions, instead of the alternative framework employed by the previous energy minister, Panos Skourletis, one of the more vocal opponents of free market reforms and liberal policies in the pre-reshuffle Cabinet. Creditors have maintained that first auction conducted last month did not achieve the stated result of selling-off blocs of future electricity production at low prices.
If the government declines to revise the framework then a possible solution may lie in a provision in the second memorandum, whereby a bigger stake of the PPC is sold off to the private sector. The third memorandum already calls for the sale of 17 percent of PPC, which despite being listed on the Athens bourse continues to be wholly state run and with a dominant position in the retail and wholesale market.
