In Valletta on Friday 7 April, the Eurozone finance ministers agreed on the outlines of a package of reforms and expansionary measures equivalent to 2% of Greek GDP to be applied by Athens in 2019 and 2020.
However, the road to finalising the second monitoring mission of the third Greek bailout plan by the summer is still strewn with sizeable obstacles, including setting the Greek budgetary surplus (not including servicing of debt) to be complied with post-2018 and determining Greek debt relief measures to apply after 2018.
Following the meeting of Eurozone finance ministers, the President of the Eurogroup, Jeroen Dijsselbloem, announced that the main elements of the package had been agreed upon.
The Dutch minister described as follows the package of measures to be set in place in parallel before the end of the bailout plan to apply post-2018: - budgetary consolidation measures (1) to reduce pensions in the amount of 1% of Greek GDP from 2019 and (2) to increase personal income tax in the amount of 1% of GDP from 2020; - expansionary measures to exploit the margin above the primary budgetary target required for 2018 (primary budgetary surplus of 3.5% of GDP) and freed up by the previous measures.
The Greek finance minister, Euclide Tsakalotos, welcomed the success of the strategy set out by the Eurogroup in February, aiming to negotiate the more political questions before the less controversial ones (see EUROPE 11729).
Whilst Athens' creditors consider the expansionary measures to be conducive to growth, the Minister listed social measures equivalent to 1% of GDP which the Greek government hopes to adopt before the general elections of 2019: reducing child poverty, assistance with medical costs, housing and investment.
Tsakalotos also said that taking the collective agreements shelved when Greece was placed under budgetary supervision in 2010 back off ice would take effect at the end of the aid plan in mid-2018. On this point, the European Commissioner for Economic and Financial Affairs, Pierre Moscovici, told EUROPE that this was still to be confirmed.
An important discussion will take place at the end bailout plan when the budgetary surplus figures for 2018 are confirmed. The trigger for the measures will be decided on in 2018, Dijsselbloem confirmed. Moscovici stressed that the Commission is optimistic that Athens will be able to achieve a primary budgetary surplus (not including servicing of the debt) of 3.5% of GDP.
And if it is not, the budgetary consolidation measures currently in gestation will go some way toward plugging the gap. If the target is exceeded, the scale of the social measures wished for by the Greek government may rise to 2% of national GDP, in other words the equivalent of the budgetary consolidation measures.
Concluding quickly to remove uncertainty
The IMF feels that negotiations have made sufficient progress to consider an agreement at technical level on the package of reforms when the institutional creditors return to Athens. However, Dijsselbloem declined to be drawn on a date for this.
In Malta, the 'institutions' and Greece all stressed the importance of concluding the second monitoring mission of the bailout plan as soon as possible, in order to remove the current uncertainties weighing down the Greek economy.
In order to allow a second tranche of aid to be paid out, two discussions must still be concluded within the Eurogroup on the measures to guarantee the viability of the Greek public debt in the medium term and, on the other side of the same coin, as Tsakalotos put it, the Greek budgetary trajectory post-2018.
Only once these parameters have been set will the IMF be able to decide on its financial participation in the bailout plan. It stresses that discussions will still be required with the Eurozone countries to obtain sufficient guarantees on a credible strategy to restore the viability of the Greek debt.
Once the second monitoring mission of the third Greek bailout plan has been finalised, the ECB should be in a position to decide on whether Greece can join the 'quantitative easing' operation for the mass buyback of mainly public securities. (Original version in French by Mathieu Bion)