Βy T. Tsiros
[email protected]
The prospect of a precautionary credit line for crisis-bedeviled Greece has resurfaced after two and a half years, as the end of the current memorandum (August 2018) now appears on the horizon.
Such a financing mechanism would, ostensibly, allow for an easier foray into the markets, given that institutional lenders' loans will, in theory, have been exhausted. Such a financing tool was described in the Eurogroup decision of June 15.
The last paragraph of the decision reads: "In view of the ending of the current programme in August 2018, the Eurogroup commits to provide support for Greece's return to the market: the Eurogroup agrees that future disbursements should cater not only for the need to clear arrears but also to further build up cash buffers to support investor's confidence and facilitate market access."
The exact sum that will be set aside for such a precautionary credit line remains to be decided, along with the terms and conditions for its implementation and its duration, all of which are expected to be the focus of yet another future round of grueling negotiations between Athens and its European creditors and partners.
The issue, along with the height of primary budget surpluses on a yearly basis, is up for discussion in the summer of 2018, months or weeks before the third bailout ends. In terms of the fiscal target, creditors and Athens must agree on whether a 3.5-percent primary surplus budget target can be met in 2019 without the stepped up measure of lowering the tax-free threshold on taxpayers' annual income (beneath 6,000 euros in annual income). The once inconceivable - and politically painful - measure was included in the latest austerity package passed by the leftist-rightist coalition government just last month.
The same time period (summer of 2018) and prospective negotiations will also be crucial for the current government's prospects in 2019, assuming snap elections aren't declared in the meantime, given that creditors will decide if the Tsipras government's oft-repeated package of countervailing measures can be implemented in 2019 and 2020, and to what extent.
In absolute terms, Greece received 21.4 billion euros from institutional creditors throughout 2015 - the "annus horribilis" of the nearly eight-year economic and political crisis. Sixteen billion euros were disbursed to cover the country's maturing loan obligations and 5.4 billion euros went for banks' recapitalization, out of the 25 billion euros that were initially budgeted in the hastily drawn up third memorandum (August 2015).
In 2016, the sum disbursed to Greece corresponded only to the first review of the Greek program (third bailout), namely, 10.3 billion euros, beginning with a tranche of 7.5 billion euros in June 2016.
For 2017, this month's Eurogroup meeting in Luxembourg removed the last obstacles to disbursing a 7.7-billion-euro tranche, of which 6.9 billion euros will cover loan maturities and 800 million euros will be used to pay off arrears owed by the state.
Of the total 86 billion euros budgeted in the third memorandum more than half, 45.8 billion euros, remain untapped.
European creditors and the Greek side must at some point decide what portion of the enormous sum will be disbursed via future reviews of the current program to clear the Greek state's arrears, and what portion of the sum can be set aside as a "cash buffer" in any future precautionary credit line.
