Brussels, 23/05/2016 (Agence Europe) - On Tuesday 24 May, the Eurozone finance ministers will attempt to finalise the first monitoring mission of the third bailout plan to Greece after the Greek Parliament on Sunday approved all of the prior measures required (see EUROPE 11554).
“A key step has been taken towards the conclusion of the first stage of the Greek programme”, the Commissioner for Economic and Financial Affairs, Pierre Moscovici, announced in Paris on Monday 23 May. He expressed his hopes of a definitive agreement between Athens and its creditors at the Eurogroup meeting this Tuesday.
On Sunday evening, the Greek Parliament adopted the prior measures required to conclude the first monitoring mission of the Greek bailout plan, thanks to the small majority of the Greek government coalition led by Syriza. New tax measures (VAT increased to 24% for certain goods, creation of a residence tax for the hotel sector), the creation of an independent public revenue authority, the creation of a privatisation fund for public assets and the development of the Greek land heritage as well as a strategy to deal with non-performing bank loans were approved. The Greek members of parliament also approved the automatic budgetary cuts mechanism (not including the defence sector and certain social expenditure), to be activated only if the Greek budgetary trajectory deviates from the objective leading to a primary surplus (not including servicing of the debt) of 3.5% of GDP in 2018. The institutions (European Commission, ECB and IMF) will send the ministers their views on whether these measures comply with the economic adjustment programme agreed in August 2015.
As regards the debt, the ministerial discussions will focus mainly on the scale and timetable of the public debt relief Athens will be granted. Initially scheduled for a date after the end of the first monitoring mission, these have finally been brought forward to help the Greek government to sugar the pill of a further round of budget cuts and to avoid making matters worse for a country facing a humanitarian crisis stemming from the unprecedented influx of refugees from Turkey. On the basis of the Eurogroup declaration of 9 May (see EUROPE 11447), the ministers will attempt to detail the types of measures possible in the immediate future, by 2018 and in the longer term. “The aim is to have something bit more specific (than the declaration of 9 May), with a timetable”, a European source said on Monday 23 May.
The options under discussion are buying back securities at a lower rate, a longer grace period, an extension of maturities and a reduction in rates. Greece's interests must be reconciled with those of the IMF, which is calling for ambitious measures to participate and contribute to the bailout plan, as well as with of countries such as Germany, which are disinclined to be excessively generous in view of national public opinion.
The finalisation of the first monitoring mission will pave the way for the payment of a further tranche of aid, which will allow the State to honour its commitments by the end of the second monitoring mission scheduled for the autumn. According to a report by the European Commission, which will be put to Tuesday's Eurogroup for assessment, the amount of the tranche of aid could be as high as €11 billion, made up of €7.2 billion to service the Greek debt and €3.8 billion to reabsorb some of the stock of State payment arrears, Bloomberg reported on Monday. A European source suggested that somewhere between 5.5 billion and 7 billion euros was more likely. (Original version in French by Mathieu Bion)