Parliamentary Budget Office warns against missing tranche

Reports that the government may fail to clinch a 1-billion-euro tranche from the country’s creditors next month were compounded on Tuesday with a warning from the Parliamentary Budget Office (PBO) concerning the completion of the second post-bailout assessment this month.

While presenting a PBO report on the Greek economy in the fourth quarter of 2018, Parliamentary Budget Office head Frangiskos Koutentakis said losing out on the tranche – part of which stems from profits from Greek bonds held by eurozone central banks – would constitute a significant source of uncertainty for the economy this year. This adds to the existing uncertainty over upcoming court decisions on retroactive payments to pensioners and civil servants that threaten further fiscal pressure.

Koutentakis said the profit payment and the waiver of the step-up interest rate margin on part of the eurozone loans would add up to 1 billion; however, the significance of this tranche lies not only in the amount itself, Koutentakis stressed, but in the message that missing it would send to the markets. He added that the reforms on which the payment of the above installment depends are very important and must be implemented, citing for example hirings required at the Independent Authority for Public Revenue and the appointment of general and special secretaries in the public sector.

Koutentakis, a former general secretary for fiscal policy, spoke of the fiscal risks the court verdicts on pensions and civil servant salaries may entail, explaining that, in fiscal terms, the retroactive payments will burden this year’s budget when the court verdicts are issued, even if the payment is spread over several years.

All these risks, he noted, are multiplied this year by the fact that 2019 is a general election year, to say nothing of uncertainties in the global economy.