With the “weapon” of the outperforming primary surplus of 2017 and a first taste of the discrepancies between the IMF and the Europeans for the relief of the Greek debt, Greek Finance minister Euclid Tsakalotos travels to Sofia, Bulgaria, next Friday to participate at the meeting of the informal Eurogroup on April 27. The Greek minister is expected to present the holistic government development strategy plan, which will accompany the country for the years to come, after the end of the memorandum, that is from August 2018 on.
For yet another year, the primary surplus exceeded the programme’s targets and was almost 2.5 times higher. Last year, according to Eurostat, the primary result based on the ESA Regulation (slightly smaller than the programme’s equivalent) was 4.2% of the GDP on the basis of the programme rules (4% of the GDP against ESA) when the programme’s target was a surplus of 1.75% of the GDP. Indeed, if one adds the € 1.4 billion given in December 2017 as a social dividend, then the real primary surplus was 3 times the target, approaching 5%, which is the government’s “line of defence” against the IMF objections to implement the tax cut from 2019 instead of 2020, on the grounds that the primary surplus from 2019 onwards (the 3.5% target) is questionable.
Perhaps even in early July
Beyond that, there are a number of issues that need to be resolved in order to reach an overall agreement on June 21 or at the very beginning of July. The willingness of all sides to “honourably” observe the timetable regarding Greece’s exit from the memorandum was confirmed the past weekend in Washington, while it was found that the discrepancies between the Eurozone and the IMF on the debt remain.
The first important stop before the completion of the programme is Friday’s Eurogroup in Sofia, where the Greek side is going to present the strategic plan for growth. This plan is one of the four “components” of the final “exit agreement”, which is to be actually achieved at the June 21, Eurogroup in Luxembourg.
The second element is the completion of the fourth and final evaluation. In the meetings of the economic staff in Washington on the sidelines of the IMF’s spring session, it was pointed out that the implementation of the prerequisites is on the right track and that, while efforts are being made to “unblock” even those facing some “technical” difficulties. In this context, the Institution are expected to return to Athens in mid-May, with the aim of reaching a staff – level agreement until the May 24 Eurogroup.
With regard to the debt relief agreement, work on the debt-to-GDP linking mechanism continues, as disagreements between the IMF and the Eurozone are still there. In particular, the IMF reiterated its call for this mechanism to be automatic and not subject to political interference.
However, this is something that strikes against the reactions of Berlin; the Germans want the Eurogroup to have the last say about the mechanism’s operation. Well-informed sources from the Greek side estimated that this is the “key” on which the full IMF participation -for which the timeframe narrows- in the Greek programme will depend, as Poul Thomsen, the head of the European section of the IMF publicly said.
The crucial timetable
April 27: Meeting of the informal Eurogroup in Sofia, where Greek Finance Minister Euclid Tsakalotos will present the government’s “holistic development strategy”
May 4-5: Announcement of the results of the endurance tests of Greek banks
Mid -May: Leaders of the Institutions in Athens to complete the 4th evaluation within May
May 24: The aim is to reach a technical agreement at the Eurogroup meeting, which is normally held in Brussels
June 21: The common goal of all sides is to have a “global” agreement on Greece, which will include both the alleviation of the Greek debt and the “modus vivendi” of the post-memoranda period. If not then, the agreement is expected to be reached on July 12 …. / IBNA
Main Photo: The Greek Finance minister, Euclid Tsakalotos