Brussels, 31/10/2014 (Agence Europe) - Cautious, sustainable and credible, is how Eurogroup describes its vision of Greece's exit from the structural adjustment programme.
It seems that the European Stability Mechanism (ESM) toolbox would contain a precuationary credit line made-to-measure for Greece, and although one shouldn't shoot the ambulance, it is possible that the remedies required to ensure Greece's health will again be challenged by the patient.
Two preventative credit lines from the ESM are feasible - a PCCL (Precautionary Conditioned Credit Line) or an ECCL (Enhanced Conditions Credit Line). PCCLs are reserved for countries with a healthy economic and financial situation that meet all the eligibility requirements. Countries not meeting the PCCL requirements have the option of an ECCL, which is seen as more binding. Precautionary credit lines are active for a year at a time, twice renewable for a period of six months each time.
Greece doesn't seem to meet all the eligibility requirements for a PCCL because of its 'antecedents' when it comes to accessing reasonsable terms on the financial markets. One will also need to wait to see what the troika's recent Greek debt projections are because one of the eligibility criteria is debt sustainability. Estimates published by Eurostat in October (calculated using the new SEC 2010 method) give a debt of 174.9% of GDP for 2013, compared with the 175.1% calculated in April.
The IMF is the body most concerned about debt sustainability. Asked in June 2014 whether it considered Greece's debt sustainable, IMF communications advisor William Murray would only say: 'There's an agreed framework in place for ensuring debt sustainability with Greece's European partners agreeing to provide any additional debt relief as needed to help bring Greece's debt down to 124 percent of GDP by 2020, and to substantially below 110 percent of GDP by 2022 as long as Greece continues to deliver on its program commitments.' In an interview with MNI in mid-October, European Financial Stability Fund (EFSF) Director General Klaus Regling said that there was limited need to reduce the Greek debt. He said: 'There is no debt overhang in Greece,' but he was only referring here to the debt/GDP ratio. Eurogroup has little appetite to take action to reduce Greece's debt and even in Greece, public statements on this subject seem to have dried up.
Plus ça change... The general feeling in Eurogroup is reported to be that Greece should take out an ECCL credit line when it exits the aid programme. This would be difficult for the Greek government to swallow because such a credit line would be accompanied by an agreement laying down 'corrective measures' to be undertaken to deal with identified weaknesses. Stronger surveillance would also be set up, with regular monitoring missions (in theory every quarter, as at present). Whether or not it is actually utilised, there is a cost attached to the credit line because the ESM has to keep liquidity up its sleeve in case it's needed and for this, it would charge a 'commitment fee' and a small margin of up to 35 base points (0.35%) for a precautionary credit line, paid at the same time as the interest payments.
Greece is due to exit the eurozone aid programme at the end of 2014 and is hoping at that time to make an early exit from the IMF aid plan. It is walking a tightrope because it has promised the population, who are exhausted after years of budget parsimony, that the troika of lenders will leave the country rapidly (European Commission, European Central Bank and International Monetary Fund). The government also faces the threat of an early election if it cannot win the 180 votes needed at the country's parliament to vote through a successor to the Greek president. The current coalition has 155 parliamentarians.
The Wall Street Journal says that the eurozone would want the IMF involvement to continue. It says that an arrangement with the IMF, similar to the arrangement for the bailout for Spanish banks, would be considered, to give greater latitude to the Greek government. As for the €11 billion from the aid package that was set aside for the banking sector and which might be repaid to the EFSF to reduce the country's debt and be used as a credit line, some are asking whether €11 bn would be enough.
No troika return date set yet. Before demanding an exit from the aid programme, Greece has to actually reach the end of the programme. A final monitoring mission needs to take place, which has been postponed due to timetable clashes. The European Commission spoke until recently of returning to Athens in early November, but on 31 October, it refused to set a date, saying that contact was ongoing. It is awaiting progress on a number of measures to be taken in Greece. The Greek media say the government will send its proposals on Friday or Saturday. Greece is hoping the troika mission can be completed before the Eurogroup meeting in December. (EL)