Lowering primary surplus target hinges on higher growth rate after 2020

European Stability Mechanism (ESM) chief Klaus Regling indicated on Friday that Greece’s lenders may consider reducing the country’s high primary surplus targets if it can overshoot growth goals after 2020.

Speaking at a press conference during a meeting of eurozone finance ministers in Helsinki, Regling said that Greece has made a commitment to the current target of 3.5 percent of gross domestic product for 2019 and 2020 and could seek a reduction after that if lending rates drop and growth surpasses the targets outlined in the country’s post-bailout program.

In any case, that is a discussion that could only take place at the end of next year when creditors have a clearer understanding of the prospects for Greece’s economy, he said.

It was the first time that eurozone lenders have publicly suggested a lower primary surplus target may be possible. However, Regling sought to keep expectations low, noting that exceeding growth targets will be no easy task: Growth in Greece in the first half of 2019 was lower than expected.

The ESM chief also welcomed the new Greek government’s economic reform program and hailed a decision to repay a chunk of high-interest loans to the International Monetary Fund before their maturity date.

Although Greece’s request to repay the 2.9 billion euros in loans to the Fund ahead of schedule was not discussed on Friday, Regling indicated that it would likely be positively received as it would improve the sustainability of the country’s debt mountain. The matter could be discussed next month when foreign auditors return to Athens, he said.

The Greek government is expected to send an official request for the early IMF repayment by Monday, paving the way for approval by the ESM, the Hellenic Financial Stability Fund (HFSF) and eurozone parliaments, which should take about two months.

Regling also welcomed the growth-oriented reforms presented at the Helsinki summit by Christos Staikouras, who made his first appearance Friday as finance minister.

A draft bill aimed at boosting growth, and creating much-needed jobs, by lifting obstacles to investment was put up for public consultation earlier this week.