By N. Bellos
Prospects of a full economic recovery for bailout-dependent Greece now shift to the European Central Bank (ECB) and markets’ sentiment, with the former tasked with determining if Greek bonds will be re-included in its Quantitative Easing (QE) stimulus program and the latter – in absolutely realistic terms – gauging the country’s credit-worthiness.
The “next day” for the Greek bailout program comes after Thursday’s Eurogroup meeting in Luxembourg, with the highlights of the session being the release of a 8.5-billion-euro loan tranche by European creditors – primarily the ESM – to Greece and a continuing effort to specify whatever debt relief measures for the country in the near future – if deemed necessary.
Release of the loan tranche was more-or-less expected and linked with the completion of the second review of the Greek program.
By all accounts, “specificity” over debt relief measures will come between July 27 and the end of the current bailout in August 2018.
Other prominent points of the Thursday’s Eurogroup meeting confirmed that high primary budget surplus targets of 3.5 percent of GDP will continue until 2022; with a 2-percent target, on average, envisioned until far-off 2060.
The specific fiscal goal has been one of the major points of contention between the International Monetary Fund (IMF) and European creditors, primarily Germany, over the last year and a half. The Washington D.C.-based Fund has maintained that the target is unrealistic, while the Europeans want the emphasis placed on high growth rates instead of debt relief.
The next general elections in Greece are scheduled for 2019, unless a snap election is declared, which means that the current government has made a commitment that will affect the next administration.
With the agreement, the possible return of the IMF to the Greek program as a lender, to the tune of two billion USD, also emerged on the horizon. Nevertheless, as per the standing IMF demand, any new lending by the Fund depends on ensuring the sustainability of the Greek debt and assuming that Athens wants the money from the IMF.
Another “highlight” of Thursday’s Eurogroup is reference to a mechanism for linking debt relief with Greece’s growth rate, essentially a proposal by the new French government whereby a higher growth rate precludes the need for debt write-downs, and vice-versa.
The other positive point for Athens is the possibility for an extension of bailout loan maturities by 15 years.
