Eurogroup decision fallout: Athens commits to primary budget surplus target until far-off 2060

One of the most prominent points that emerged from Thursday’s Eurogroup agreement concerning the Greek issue is the fact that the current government signed off on a commitment by the country to achieve a 2-percent annual primary budget surplus – on average – after 2022 until far-off 2060.The leftist-rightist coalition government in Athens agreed to the target even as forecast growth figures for the Greek economy remain undefined.

 

The same fiscal target will remain at the highly ambitious 3.5-percent target until 2022.

 

According to reports in the wake of the agreement, the IMF considered that the 2-percent figure after 2022 was too high, instead proposing 1.5 percent. Conversely, German Finance Minister Wolfgang Schaeuble continued to express the strictest position amongst creditors, initially demanding that the fiscal target for after 2022 be set at 2.5 percent of GDP.

 

As had been widely detailed in the previous period, smaller primary budget surpluses would mean more debt relief measures demanded by the IMF so that the Greek debt would become and remain sustainable.

 

During the Luxembourg Eurogroup meeting, Berlin again blocked debt relief measures being taken immediately. One significant concession, however, was European creditors’ acceptance of a French formula to link future debt repayment with Greece’s annual GDP growth.