Testing times ahead in relations between Athens and creditors

After Sunday’s elections, the government has one week to form the strategy it will pursue in its negotiations with the eurozone creditors, as June 3, when the Euro Working Group convenes, will mark the beginning of a testing time in relations between Athens and its lenders.

It became clear as soon as the government handouts were announced 20 days ago in the presence of surprised technocrats in Athens that the move had annoyed the creditors. This was because of Athens’ failure to inform the creditors in advance, as should have happened in the context of the enhanced surveillance.

The senior officials of the eurozone finance ministries will meet in Brussels next Monday, with Greece again on the table on the pretext of the creditors’ third post-bailout report that was drafted when the mission chiefs were in Athens in early May.

Sources say that the report, which will be made public two days later, on June 5, will not be positive, partly due to the government handouts, which will diminish the projected primary surplus significantly below the 2019 target of 3.5 percent of gross domestic product.

That will follow the estimates of the Hellenic Statistical Authority (ELSTAT) on June 4 for the economic figures of the first quarter of the year, which will also constitute an indication of the course of the economy and the chances of achieving the fiscal targets.

For 2020, sources say, the creditors’ estimates put the primary surplus even lower, meaning that even the government’s desired revised 2.5 percent of GDP target will be overambitious.

The Finance Ministry will also have to present its midterm fiscal plan that should incorporate the estimates from 2020 to 2023, which may well run into the opposition of the European Commission.

The next battle will take place at the June 13 Eurogroup, which is when the discussion concerning the early repayment of the expensive International Monetary Fund loans is scheduled for. However, the latest developments show that this may well be delayed until the following Eurogroup meeting. Finance Minister Euclid Tsakalotos will have to explain the handouts and how the government will cover the gap that will be created.