Creditors depart Athens without agreement on bailout program review

Creditors depart Athens without agreement on bailout program review

 Athens, April 12, 2016/Independent Balkan News Agency

By Zacharsias Petrou

The troika pulled out of negotiations with Greek officials in the early hours of Tuesday with no staff-level agreement reached and with the two documents expected, one with the EU institutions and one with the IMF, not drafted.

The negotiations now hang in the balance and the new target for a final agreement is the 22 April Eurogroup, if not even after the Orthodox Easter break.

According to reports there was no agreement and no real progress on all the open issues – social security, fiscal gap, taxation, non-performing loans – as the creditors maintained a tough stance. IMF sources revealed there was no agreement on any of the issues discussed and there is a lot of work still to be done.

The government and the troika adjourned talks on the crucial bailout review at 02:00 AM on Tuesday morning and will continue immediately after this week’s IMF spring meeting in Washington.

“There was progress on the issues needed. Therefore, the creditors will return immediately after Washington, that is, on Monday, to conclude this deal until the Eurogroup meeting on the 22nd of April,” Greek Finance Minister Euclid Tsakalotos told reporters.

There are now three possible scenarios on the horizon:

  • An agreement is reached at the IMF Spring Meeting in Washington and a final approval is provided by the Eurogroup on 22 April.
  • If the debt issue opens at the IMF meeting there will be no agreement at the April 22 Eurogroup but it could provide a commitment to begin debt relief talks. A second, extraordinary Eurogroup meeting will be needed (possibly 29 April) to assess if Greece has voted through all the necessary measures for the disbursement of bailout funds.
  • The worst scenario is that no agreement is reached in Washington or the 22 April Eurogroup. Greece will then face a fresh liquidity crisis and the prospect of default.

The IMF estimates the country’s primary surplus for 2017 and 2018 to be 1.5% and not the overly optimistic 3.5%. This should be the benchmark on which measures will be taken. The also IMF insists the numbers must add up on tax measures. It especially demands the tax-free threshold is reduced to 8.182 euros. Creditors also insist several tax hikes proposed by Athens should not be implemented (i.e. on electricity, cigarettes).

Furthermore, in the especially thorny social security reform issue, creditors believe pension cuts should start from those on 1.300 euros per month and above. The EKAS supplementary pension should also be abolished sooner.

Finally, non-performing loans should, according to Greece’s lenders, begin to be sold from December 2016 onward without a 1-3 year protection period the Greek government insists on.

In a regular briefing to reporters on Tuesday, government spokeswoman Olga Gerovasili provided information on the course of negotiations with creditors in the context of the ongoing bailout review. The spokeswoman said the fact that the IMF admits it has made mistakes is “a positive step” however, she criticized some officials of the Fund for time-wasting in the negotiations.

Gerovasili said Greece is  committed to fully implementing the agreement signed last summer in its entirety. “Our partners are expected to do the same” she added.

The spokeswoman also said it is clear there are differences between the IMF and EU creditors because the former connects the review with the debt issue, adding that no decision should be expected in Washington on the review.