By D. Hatzidimitriou
Greek Prime Minister Alexis Tsipras’ confident statement that elections will be held in the autumn of 2019, “and not a day earlier,” may have satisfied increasingly jittery deputies of the ruling coalition, yet the pledge is far more assured.
The high-profile statement, made from Parliament’s podium on Saturday, came during debate for the 2017 draft budget, which the leftist government passed by a razor-thin margin, 152 MPs.
Nevertheless, the struggling Tsipras government is now essentially a hostage to creditors’ willingness to quickly resolve a handful of major and intertwined issues — second review, debt relief, annual primary budget surplus targets after 2018, re-inclusion of Greek bonds in the ECB’s QE program — as well as to collapsing public support, at least as far as opinion polls are concerned.
Therefore, Tsipras’ contacts in Europe this week, including a meeting with Angela Merkel in Berlin on Friday, are deemed as imperative towards closing pending issues with creditors, with Athens eager to conclude the second review of the Greek program, for instance, “as long as excessive or unacceptable demands aren’t pressed by the other side”.
The Greek PM’s contacts in Berlin are seen as the most crucial, given that Athens wants to persuade German leadership and the coalition there to shift to a more flexible position than the one vociferously expressed by German Finance Minister Wolfgang Schaeuble. Adding to the complexity of what appears to be a never-ending “Greek saga” is Schaeuble’s divergence with the IMF on certain issues (i.e. primary budget surpluses) and his concurrence with the Fund’s positions on others (deep reforms).
While a new, and delayed, round of talks between Athens and representatives of creditors is due to begin this week, the leftist-rightist coalition government has repeatedly said it will not commit to more austerity measures after 2019 to ensure that it fulfills high fiscal targets — a standing demand by the IMF if the primary budget surplus goal of 3.5 percent of GDP remains. The Fund has previously said it believes the specific target is wholly unrealistic, however, given European creditors’ insistence on the target — especially Berlin — the Fund maintains that it can only be achieved with more austerity measures. The latter would qualify as a fourth memorandum in all but the name, but without a fixed lending program.
Additional measures exceeding four billion euros would have to come from an expansion of the tax base, which in this case means lowering the tax-free ceiling from the roughly 8,500-euro threshold currently in place. More pension reforms, downwards, would also be store.
Both prospects are, however, an anathema to a Tsipras government already trailing its main center-right political rival by double-digit numbers in opinion polls.
