By Vassilis Kostoulas
[email protected]
The early morning Friday agreement at the Eurogroup more-or-less confirmed a series of previous assumptions over a future framework of the closely watched Greek program, but have less to do with a celebratory “end-of-memorandums era” that served as the main “discussion point” by the Greek coalition government over the recent period.
“Enhanced supervision” is a far cry from another “catchphrase” repeatedly uttered by members of the poll-trailing Tsipras government, namely, a “clean exit”. What follows is a regime of systemic reviews, which in tandem with the Greek state’s fiscal and economic performance, will convey definitely calculable information to markets. The more positive or negative such results are will, as expected, facilitate or complicate Athens’ borrowing from sovereign money markets
Although the hefty credit line of low-interest ESM loans ends with the third memorandum in August 2018, commitments undertaken by the Tsipras government will extend well-beyond the third bailout and cover practically all of the sectors mentioned in the third memorandum program.
While avoiding a precautionary credit line after August 2018, which government officials in Athens considered as a mere extension of the current memorandum or even a “memorandum 3.1”, an unofficial “safety net” was created instead with a 24.1-billion-euro “cash cushion”, as was stipulated in the Eurogroup agreement.
By current reckoning, the “nest egg” can cover the country’s credit needs for 22 months after August, meaning that while exiting the third – and last – bailout Greece does not necessarily need to make new and risky forays into the markets.
Regarding the debt front, a previous leitmotif of top European officials, mostly the German side and even the ESM, of “if necessary” was replaced at the Eurogroup with “a little something”, in terms of debt relief.
Developments confirmed previous reports by “N”, whereby Germany appeared unwilling to approve of a substantial sum to cover Greece’s debts to the IMF – with only 3.3 billion euros of the third bailout’s last loan tranche funneled in this direction. At present, the country owes the Fund 11 billion euros, although loan money not disbursed as part of the third reaches 24 billion euros.
Additionally, a decision to extend maturities of EFSF loans disbursed to Greece as part of the second memorandum is deemed as a success, along with any measure offering more debt forgiveness to the recession-battered country. This decision is a compromise, with the IMF preferring 15 years, and with Berlin beginning the discussion by offering a three-year deferment.
Beyond the “carrot” dimension of the agreement, the “stick” portion is entailed in the direct linking of steady debt relief with the course of implemented reforms, and, of course, with successfully meeting fiscal targets – i.e. a 3.5 percent primary budget surplus, as a percentage of GDP, until 2022, and a 2.2-percent annual target between 2023 and far-off … 2060.
