Yet another Eurogroup meeting with momentous impact on the Greek program will take place on Thursday, in the shadow of a once-again delayed review of the ongoing bailout program.
The second review of the Greek program was previously scheduled to have been finalized last November.
On its part, the increasingly embattled leftist government in Athens wants to avoid the enactment of “pre-emptive” austerity measures, ones set to apply for after 2019, months after the current bailout program ends.
On the back of leaks, unofficial press briefings and deductions from official statements over the recent period, new austerity measures in Greece at this point mean a reduction in the annual tax-free threshold (now hovering at 8,500 euros) for wage-earners and self-employed professionals, as well as an agonizing harmonization (downwards) for several castes of pensioners.
Finance Minister Euclid Tsakalotos will head up the Greek delegation at Thursday’s Eurogroup meeting, days after his Prime Minister Alexis Tsipras delineated his government’s latest “red line” with the phrase “not a euro more” in austerity measures after 2019.
Despite what is shaping up to be tough session for the Greek side, the leftist-rightist coalition government in Athens wants to achieve the following:
- A Parliament vote only for an extension of an automatic spending cuts mechanism, one that will specify measures demanded by the IMF, but without its immediate activation. Creditors are expected to table a counter-proposal that requires legislated austerity measures now, but with a deactivation clause in case Athens meets fiscal targets.
- Extension of the “cutter”, as the mechanism has been dubbed, for only a year, another compromise recently uttered by Tsipras. Conversely, creditors — and especially European institutional lenders — are demanding highly ambitious primary budget surplus targets (3.5 percent of GDP) for up to 10 years.
- Diversion of one percentage point of achieved primary budget surpluses (assuming the 3.5-percent goal is met) towards reducing tax rates that skyrocketed during SYRIZA’s two years in power.
- An immediate detailing of medium-term measures for the Greek debt, thereby ensuring the continuing participation of the IMF in the Greek program and achieving the re-inclusion of Greek bonds in the European Central Bank’s (ECB) Quantitative Easing (QE) program.
