Greece preparing final legislation for conclusion of bailout review

The Greek government is expected to submit to Parliament by Thursday the last batch of draft legislation needed to conclude the current bailout review.

This will include the fiscal mechanism for applying automatic cuts if primary surplus targets are not reached, the framework for the new privatization agency and sale of non-performing loans.

There are still some details to iron out regarding the fiscal brake. The International Monetary Fund, for instance, has demanded that the government make it clear what type of expenditure will be excluded and to ensure that pensions and public sector wages are not exempt.

The government will also have to submit to Parliament this week the bill containing another 1.8 billion euros in tax interventions, mainly increases to indirect taxes, such as the top rate of VAT, which will rise from 23 percent to 24 percent.

Athens aims to have all this legislation approved in Parliament before the Euro Working Group on Monday, May 23, so that the following day’s Eurogroup meeting can lead to the review being concluded. If that is the case, Greece will then be in line to receive between 9 and 12 billion euros in funding.

Of this, 5.7 billion euros will be for debt servicing. Up to 6 billion euros more will be released so the government can reduce its arrears. However, the disbursement of the second amount will take place in sub-tranches that will be conditional on the government paying of its arrears to suppliers and others.