Greece's bailout review should be easy
by Martin Foehler and Alberto Paez
Eurogroup meeting is taking place today in Brussels with major topic in the agenda the second review of Greece's bailout program. Headlines are heating up, as the psychological war kicks-off and a number of media outlets have already started to place bets on another chapter of the "Greek drama".
Truth is that the list of 15 requirements that will unlock the tranche of €2,8 billion does not include any additional financial measures, direct spending cuts or tax hikes. Most of the issues are procedural and what has to be done is to overcome some bureaucratic hurdles. Still, there are some steps that have to be made on the liberalization of energy market, which is a quite sensitive issue for the government at that stage of negotiations.
As of the composition of the board of the new privatization fund, "case is closed" but it is certain that creditors will raise their voice trying to further bruise government's social reflexes. Essentially, decision-making balance in the fund is guaranteed, favoring the Greek side, but there are many circles among the creditors, but also domestically within the lines of opposition parties, that would love to press for changing this status.
Experience from previous Eurogroup meetings on Greece shows that we should not expect any delay, with the Greek government fulfilling its commitments in the coming weeks. If things go wrong, meaning a repetition of the months-long first review during the first semester, blame should be fairly put to the creditors' side. At the same time, it seems that election campaign in Germany might loosen up Merkel's austerity-oriented mindset, thus expecting a milder role in the negotiations. For the Greek government, there are two pending issues: lowering primary surpluses after 2018 and dealing with concrete debt relief measures by end of December. Both issues are tricky, difficult to bring them through. Solid support from the European South is what Greek PM Tsipras needs.
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Martin Foehler and Alberto Paez are Policy Analysts at Bridging Europe.
September 9, 2016