In Athens on Tuesday 2 May, the authorities and institutional creditors of Greece reached an agreement in principle on the detail of the reforms to be applied by Greece post-2018 in order to maintain a primary budgetary surplus (not including servicing the debt) of 3.5% of GDP up to 2021.
“We have white smoke”, said the Greek finance minister, Euclid Tsakalotos. The President of the Eurogroup, Jeroen Dijsselbloem, welcomed this preliminary agreement between the 'institutions' (European Commission, ECB, IMF, ESM) and the Greek government on a package of reforms that will be “complemented by discussions in the coming weeks on a credible strategy for ensuring that Greece's debt is sustainable”, he tweeted.
This package of reforms will be the basis to finalise the second monitoring mission of the third Greek bailout plan with an envelope of €86 billion from the ESM, the 'institutions' announced in a joint press release. It will be confirmed next week by the Euro working group. It will then be up to the Greek authorities to have these measures approved by the Greek parliament in mid-May, ahead of the Euro group meeting of 21 May. The swift implementation of these commitments should allow the Eurogroup to endorse this agreement at its next meeting, Pierre Moscovici commented.
The package of measures to be adopted by Athens in parallel is as follows: - budgetary consolidation measures (reducing pensions at a level of 1% of Greek GDP from 2019 and increasing personal income tax at a level of 1% of GDP from 2020); - social and/or growth-stimulating measures that will use the margin above the budgetary objective for 2018 (primary budgetary surplus of 3.5% of GDP) and achieved by the first set of measures. It also includes energy market liberalisation measures (privatisation of State-owned coal-fired power stations owned).
At a budgetary level, Athens and its creditors have agreed to maintain the primary budgetary surplus of 3.5% of GDP for three more years, up to 2021 (see EUROPE 11773), a source told EUROPE.
On Monday 22 May, the Eurogroup will seek to agree on medium-term relief measures for the Greek debt, on the basis of the agreement reached at the end of May 2016 (see EUROPE 11557). This is an indispensable condition for the IMF to be able to decide on whether to participate financially in the third Greek bailout plan.
The tranche of financial aid to be received by Athens will at least be used to pay back €7.4 billion in debt instruments held by the ECB in July. This envelope may be added to by the requirement to assist the Greek State in covering its operating costs and paying off its arrears. (Original version in French by Mathieu Bion)