Creditors’ mission chiefs arrive with a long list of prior actions

The start of the fourth post-bailout assessment of Greece by its creditors, which starts on Monday, represents a new era in relation between the two sides, as they have to construct a new framework of cooperation after the change in government, based on trust and the adoption of common targets.

The first round of talks with the mission chiefs in Athens will last for three days, but they will arrive with a long list of prior actions – i.e. the reforms agreed with the previous government that remain pending – and with their budget estimates that will determine whether Greece achieves the goal for a primary surplus of 3.5 percent of gross domestic product.

For the government, these three days will constitute an opportunity to figure out whether the creditors will allow it to finance a  tax easing program next year too, mainly through including the takings of eurozone central banks’ profits from Greek bond holdings (SMPs and ANFAs) in the 2020 budget. These profits amount to 1.2 billion euros. Without this additional leeway it will be hard for the target of 3.5 percent of GDP to be attained if the tax relief announced by Prime Minister Kyriakos Mitsotakis in Thessaloniki this month is implemented. The matter will be determined at December’s Eurogroup.

Finance Minister Christos Staikouras has prepared the talks down to the fine details, with the debt settlement mechanisms set to be at the focus of talks once again. A ministry source says that the content of the new standard arrangement of expired dues has already been agreed after Athens accepted the introduction of income criteria. However, questions remain as to how much the 120-tranche mechanism for tax debts will fetch toward the state budget.

The projected positive budget result for this year, with a possible primary surplus overrun too, are also based on the positive course of revenues in July, August and the first three weeks of September, Finance Ministry data show.

Nevertheless, everything remains open for 2020. A key factor is the growth rate, which the ministry projects at between 2.3 and 3 percent. The indirect fiscal easing through SMPs and ANFAs will assist in increasing the growth rate, ministry officials note.