Greek backtracking on reforms may prolong next review, says ECB official

Greece should not put off agreed bailout reforms or it could “complicate” an upcoming bailout review by its foreign creditors, a European Central Bank official said on Saturday.

Greece’s third bailout review is expected to begin in October with bad loans, the 2018 budget, the energy market and privatizations among the main issues, the ECB’s mission chief in Greece, Francesco Drudi, told Greek newspaper Proto Thema.

“If any major backtracking or delays occur in the implementation of the key deliverables due so far, this could complicate the completion of the review,” Drudi said.

“Unfortunately, a number of parliamentary bills adopted after the conclusion of the second review may not be in line with program commitments and will have to be assessed by our teams,” he said.

Athens is keen to conclude the review quickly to help smooth its return to market financing, as its third bailout program ends next August. The second review dragged on for half a year, and delays had hurt economic activity.

Greece has two remaining bailout reviews and Drudi said it should aim to complete at least one between now and the end of the program to create momentum.

“With regard to the post-program period, we fully understand the government’s desire for a clean exit,” he said. A “clean exit” would mean Greece emerging from its latest bailout without further conditionality.

“This will require a lot of effort to convince markets, investors and depositors that the momentum for reform will not abate and that no reversal of actions taken during the program will occur.”

Drudi said he expected Greece’s fiscal targets for the year were “still within reach.”

“As far as next year is concerned, we do not have enough elements to assess the risks of a potential negative carry-over to 2018,” he said.

Greece expects a larger-than-targeted primary budget surplus this year and plans to tap bond markets again within seven months, a senior Finance Ministry official said on Wednesday.

Without specifying a figure, the official said the country is this year set to exceed a targeted 1.75-percent-of-GDP primary budget surplus, which excludes debt servicing costs. [Reuters]