By T. Tsiros
An addendum attached to Friday’s Eurogroup announcement regarding the Greek program – hours after Eurozone finance ministers approved the fourth and last review of the third and equally last bailout – is essentially a “road map” for Greek governments’ post-memorandum obligations.
In general terms, six main “prior actions” will have to be implemented by this and future Greek governments, with success now linked with medium-term debt relief measures – mostly maturity extensions, covering previous higher-interest loans and a return of profits generated by Greek bonds in creditors’ hands – as opposed to disbursements of bailout loans, as was the case previously.
The first of the “broadly painted” prior actions deals with the now well-known annual fiscal targets Greece must meet, with the current government, in fact, committing the country to far-off 2060.
As repeatedly stated, Greece must achieve a 3.5 percent (of GDP) primary budget surplus until 2022. Moreover, the agreement announced on Friday stated that the country must “respect” the previously agreed to reforms included in the third memorandum and ratified by Parliament. That essentially means that a another round pension cuts – expected to affect roughly 30 percent of current beneficiaries – and a lowering of the tax-free annual income threshold must be implemented in 2019, regardless of whether Athens can meet the fiscal target even without the additional austerity measures.
The first “prior action” also includes reforms in the tax administration, with permanent staff members of a now independent public revenues authority needing to reach 12,000 by the end of 2018 and 13,322 by the end of 2021.
At the same time, the Greek state must avoid accumulating new arrears by taxpayers but also fully cover its arrears to the private sector.
A second overall “prior action” deals with social welfare. Streamlining measures and centralized electronic platforms aim to reduce waste in state spending. A new unified fund for all primary pension entities – EFKA – is expected to fully include every facet of the state’s social security “foot print” by 2020. Creation of 240 primary health centers by 2020 is another obligation, one aimed at boosting preventative care in the country and reducing the strain on public hospitals’ emergency wards.
Moreover, the target for 2022, in terms of centrally purchased hospital supplies, is 40 percent.
A third “prior action” deals with credit institutions, mainly systemic banks, and especially the latter’s obligation to reduce the Olympus-sized “mountain” of “bad debt” they hold in the form of non-performing loans (NPLs).
Inaugurating electronic and online applications in Greece’s notoriously creaky judicial system is but one of the sub-reforms that must be implemented in order to sort out cases in involving mortgages and property liens – a large bloc of which comprise NPL portfolios.
On a more strategic level, the Hellenic Financial Stability Fund (HFSF) will have to present a strategy by the end of the year to sell-off its shares in Greece’s four systemic banks – which have been recapitalized three times in the bailout era – with sell-offs of shares coming by no later than mid 2022.
An obligation dealing with the HFSF itself, in fact, is that it will remain fully autonomous and continue to function under market conditions, and without any political intervention. The fund is a special purpose vehicle created to help stabilizing the Greek banking sector amid the state debt crisis.
Continued labor sector liberalization and reforms comprise the fourth “prior action”, with one particularly painful – for wage-earners in the private sector – obligation on the part of the state being an annual assessment (and readjustment, if necessary) of the minimum monthly wage in order to maintain competitiveness. Another reform is continued efforts to combat “off-the-books” employment in the country, a decades-old problem.
Another nearly two century-old problem – given that the modern Greek state came into being in 1830 – is a lack of a land registry (cadastre), itself a glaring exception for a western state, let alone an EU and Eurozone member.
After more than two decades after generous EU funding was first funneled towards creating a unified, functional and digitalized land registry in the country, creditors in 2018 placed another deadline on the horizon, 2021. The obligation holds that the state must register cadastral and forest maps by the end of 2021.
The all-important privatization “front” comprises the fifth “prior action”, with deadlines envisioned for the sell-off state stakes in the Athens International Airport (AIA), the dominant power utility (PPC), the natgas transmission grid operator (DES.FA) and Hellenic Petroleum (Hel.Pe) cited, along with marinas, a toll-way, regional natural gas providers, water utilities and secondary ports around the country (Alexandroupolis and Kavala by the end of 2019).
Finally, continued and deep reforms in Greece’s cavernous and red-tape-laden public administration comprises the sixth “prior action”.
