Talks with creditors to resume

Just over a month since the negotiations came to a halt due to the elections, the big battle between the government and its creditors will resume next week with the aim being the successful and timely completion of the first review.

The focus of talks will be on the 2016 budget, with the two sides starting from different points and the creditors already discerning the need for additional fiscal measures. However, the larger package of reforms that has to be agreed will be more testing. It will include the reform of the social security system, the recapitalization of banks, and structural reforms and interventions that will affect a cross section of the economy and society.

Government officials told Kathimerini that the creditors’ technical experts will arrive in Athens next week to examine the fiscal figures. The fiscal measures will be the first battleground, as government officials are expressing confidence that they can meet the budget targets, while the creditors are concerned that the measures approved in Parliament are not being properly implemented and may require fresh interventions.

The Finance Ministry argues that once all of the measures voted in August are implemented it is very likely that the target for a primary deficit of 0.25 percent of gross domestic product will be beaten. Officials estimate that the result may be zero or may even present a slight primary surplus. With all measures implemented, they also forecast that the target for a primary surplus of 0.5 percent of GDP can be attained next year.

The above estimates will be included in the first draft of the 2016 budget that must be submitted in Parliament by October 5. This will likely include the revised forecast for this year’s GDP. The bailout agreement provided for a 2.3 percent contraction this year, but the latest forecasts point to a contraction of no more than 1-1.5 percent. The government will use this to try to shake off any pressure from the creditors for new measures.