On Monday 28 November, the European Stability Mechanism (ESM), the financial arm of the third Greek bailout plan with an envelope of €86 billion, presented Greece and the representatives of its creditors with short-term measures to relieve the Greek debt, which the Eurogroup will be called upon to approve on Monday 5 December.
The prospect of an agreement on these measures between the Eurozone finance ministers is very credible, an expert source said on Tuesday 29 November. At the European Parliament, the President of the Eurogroup, Jeroen Dijsselbloem, confirmed that the specific technical work was almost completed.
The ESM, which is the largest holder of Greek debt, looked at three types of measure listed in the Eurogroup agreement of May (see EUROPE 11557): - modifying the reimbursement profile of the Greek debt by adjusting the average maturity of the securities from 28 to 32 years; - adopting measures aiming to reduce the risk related to the interest rate; - removing the provision (which is punitive upon Greece) carried over from the second Greek bailout plan and which states that the interest rate set for certain debt securities will increase from 2017 if Athens does not reimburse enough of its debt through privatisations.
Once they have been approved by the Eurogroup, these short-term measures will not require the approval of the national parliaments of the Eurozone countries and can be applied immediately. The cumulative effect of these measures was described by this expert source as reasonable right up until 2060, which is the ultimate deadline for the Greek debt securities issued in the course of the bailout plan is to be paid back. At this stage, it is unclear whether these measures will be deemed sufficient for the IMF to consider the Greek debt viable.
On Monday of next week, the Eurogroup may very well make a decision on these short-term debt relief measures. However, it could also link the approval of these to the finalisation of the second monitoring mission of the third Greek bailout plan. That will then be a political judgement, the same source said, describing agreement on this monitoring mission as possible. Dijsselbloem argues that any measure of solidarity is conditional on complete compliance with the budgetary objectives and reforms laid down.
The conditional measures that Athens' creditors may bring into play are as follows: - the reform of the employment market, in which process the government wishes to reinstate the collective agreements in full (see EUROPE 11673); - the liberalisation of the electricity sector; - plugging a budgetary discrepancy with regard to the objective of achieving a primary budgetary surplus (not including servicing the debt) of 3.5% of GDP in 2018.
On the last of these points, the Greeks are reported to have put this discrepancy at 0.1% of GDP, compared to 0.4% in the opinion of the creditors of the country.
Dijsselbloem in favour of setting a credible budgetary trajectory
On the budgetary question, the President of the Eurogroup believes that Greece's creditors should agree to set a reasonable budgetary trajectory. He stressed the need for realism, describing as relevant the IMF statement that Greece cannot be asked to maintain a budgetary surplus at such a high level for an extended period.
The day before, the Greek finance minister suggested that beyond 2018, Greece's primary surplus objective be reduced from 3.5% to 2.5% of GDP and the budgetary margin be reused to stimulate the competitiveness of the Greek economy by means of tax cuts for Greek SMEs.
On a brief visit to Athens on Monday, the Commissioner for Economic and Financial Affairs, Pierre Moscovici, expressed his approval of the work to provide Greece with a viable safety net covering the poorest in society and offsetting the effects of the crisis, by means of the crucial deployment of a social solidarity revenue program, which is a key element of the second assessment of the program. Amongst possible reforms, he referred to improvements to family allowances or disability benefit and health care reform, in order to ensure universal access at affordable prices. (Original version in French by Mathieu Bion with Elodie Lamer)