How Greece will unlock bailout funds in June

How Greece will unlock bailout funds in June

Athens, May 26, 2016/ Independent Balkan News Agency

By Zacharias Petrou

The 24 May Eurogroup meeting saw the conclusion of the first bailout review, however, the Greek government still has a series of prior actions to implement following the agreement reached.

The Finance Ministry appeared pleased with developments, as is evident from the statements of Finance Minister Euclid Tsakalotos. The minister said Greece can now expect to return to growth, adding that EUR 3.8 billion will be channeled to the real economy (via the payment of State arrears) as a result of the conclusion of the review.

However, in order to secure the first sub-tranche of the 10.3 billion euro bailout funds, the government still has significant work to do.

For the first 7.5 billion euro installment to be disbursed mid-June, Athens must make some amendments to the reforms recently legislated for the social security system and non-performing loans management. Furthermore, it must technically make changes to the legislation establishing the privatizations hyper-fund.

At the same time, negotiations to define the exact debt relief measures that will be taken will begin alongside the preparation of a fresh set of prior actions that Greece will have to implement as part of the second review of its adjustment program which is due to begin in September.

A new mechanism for the disbursement of the second installment (2.8 billion euros) in sub-tranches will also be set up. Greece will provide a schedule for the payment of appears it is planning and funds will be conditionally disbursed to meet them.

Deliberation between the EU and the IMF to finalize the Fund’s participation in the Greek program are expected to be concluded by December.

What needs to be done for Greece to receive 7.5 billion euros in June:

Creditors will carry out a check to determine that the recently approved measures have been implemented correctly by the government. This involves going over the legislation.

  • Amendments/fixes of legislation on the sale of non-performing loans and the pension system.
  • Implementation of prior actions relating to privatizations (first and foremost to have the privatization agreement for “Elliniko” ratified in parliament).
  • MoU will be updated and national parliaments will approve disbursement of first 7.5 billion euro sub-tranche.
  • The second sub-tranche (2.8 billion euros) will be available after the summer. Its disbursement will be carried out in installments and upon approval by EU institutions. The funds will be channeled to paying Greek State arrears.
  • The 7.5 billion euro tranche is tied to the following conditions being met by Greece: completion of all prior actions concerning the privatizations hyper-fund, the management of banks, the new Independent Authority for Public Revenues and interventions in the energy market. These will have to be rubber-stamped by the Euro Working Group and European Stability Mechanism.

Following the conclusion of the review, the government plans to signify its effort to return to growth through a series of initiatives and policies. Prime Minister Alexis Tsipras is reportedly expected to present a “road map to growth” in an upcoming cabinet meeting, possibly next week after Vladimir Putin’s visit to Greece is over while during the summer the government is expected to keep parliament open (with plenary not holiday sessions) as it plans to introduce various pieces of legislation.