European sources close to the negotiations underlined on Tuesday the significant step towards a return to normality Greece made after the rapid completion of a third review of the Greek bailout programme and a Staff Level Agreement reached between the country and the institutions. Eurozone finance ministers welcomed an agreement presented during Monday’s Eurogroup meeting and noted that the next landmark date, based on the timetable agreed between the institutions and Greece, was January 22, 2018 when a scheduled Eurogroup meeting will discuss the Compliance Report to formally complete a third review -in record- time by Greek standards.
This development would give a green light for the disbursement of a loan tranche worth of around 5.0 billion euros in early February, although this sum could be revised, they said.
According to the sources, Greece has already implemented around 30 pct of a total of 110 prior actions related to the third review of the adjustment programme, while a significant part of the remaining actions was already at an advanced stage. They noted that around one third of the 110 prior actions required passing legislation, expected to be completed by Christmas, while the remainder was expected to be covered with ministerial decisions and other actions.
They also mentioned there was not necessary to introduce new fiscal measures in 2018, as the institutions believe that a primary surplus of 3.5 pct of GDP in 2018 was feasible based on the growth rates expected next year. Regarding the fiscal package agreed for the 2019-2020 period – following recommendations made by the International Monetary Fund (IMF) – which has a fiscally neutral impact, negotiations are expected to begin in May-June 2018. Regarding the fourth review of the current programme, the sources said Greece needed to fulfill 81-82 key deliverables.
The sources added that data released by Hellenic Statistical Authority on Monday on the country’s GDP (showing 0.3 pct of GDP growth rate in the third quarter of 2017) were fully compatible with targets and forecasts included in an adjustment programme. All European institutions expect Greece to exceed a target for a primary surplus of 1.75 pct of GDP by around 1.0 pct of GDP, noting it was the third successive year of exceeding targets, while they stressed that the government will offer a 720-million-euro social welfare package, noting this was not a new spending and adding that it was a positive move.
The implementation of the e-auctions and an out-of-court debt settlement mechanism for enterprises were a series of measures for the financial sector that brought about positive development, they said. “We are now looking at the implementation of measures already taken,” they reported, as well as adding that e-auctions of property would reveal so-called strategic defaulters. Around one-third of scheduled e-auctions were cancelled because borrowers agreed to the repayment of their debt.
However, the issues remaining to be resolved are related with Greek economic competitiveness, interventions in the labour market, licensing of enterprises, a privatisation fund, a property register, etc. In the energy sector, an agreement was reached, in cooperation with the EU’s DG Comp, for some lignite units in Greece and the two sides were examining the model to be followed in the operation of the energy market and the privatisation of DESDA. A pending issue is the further reform of the public sector, with the appointment of managers and the implementation of new legislation on political party funding. On the VAT issue for Greek islands, the sources said there were bureaucratic problems in offering a further extension to a waiver from the high VAT rate.
“It is important that all sides stick to agreements. We must not have any changes to existing agreements. Greece is on a positive course to complete the programme and completion of a review by the end of January will offer space on the discussion on further debt-relief measures based on Eurogroup decisions,” the sources said. And they finally added: “We want things to happen. We want to see bulldozers on the Hellinikon site, to create new job positions, we want see work.” .