ESM projects budget failure after measures

European Stability Mechanism chief Klaus Regling expressed fears concerning Greece after Thursday’s Eurogroup, particularly regarding the government handouts.

“We are concerned about the widening of the Greek spreads,” he said, referring to the gap between the yields of the Greek and German benchmark bonds. Stressing the markets’ negative reaction to the measures Prime Minister Alexis Tsipras announced last week, he noted the 50-basis point increase in that spread.

Regling added that although no final valuation of the measures has been made, the original ESM analysis shows that the target for a primary budget surplus of 3.5 percent of gross domestic product “will not be achieved by a considerable margin, and even more in the next year.”

The issue will be discussed in detail at the next Eurogroup, after the submission of the third post-bailout report by the creditors.