Greece’s lenders return for start of review

The main representatives of Greece’s lenders are expected to arrive in Athens on Saturday ahead of the start of negotiations regarding the first review of the country’s bailout, which are due to begin on Monday.

The officials from the European Commission, European Central Bank, European Stability Mechanism and International Monetary Fund are expected to hold talks with Greek government officials from Monday for about a week. They will then leave Athens and return only when the coalition is in a position to complete the review.

Speaking in Athens last night, Finance Minister Euclid Tsakalotos said he believes that the review will be completed by the end of March or end of April. This reflects to some extent the political sensitivity of a number of the issues on the agenda, including pension reform, fiscal measures, the new privatization fund and the sale of nonperforming loans.

Greece’s lenders have now had a chance to study the government’s pension reform proposals but Athens is none the wiser regarding what changes they will ask for as a result of the differences in position on this issue between the quartet of lenders.

The IMF is thought to be pushing for cuts of 15 percent to pensions. The coalition, though, has said it will not accept reductions to existing pensions. The Greek side may be willing to consider cuts to higher pensions in a bid to close the review.

There is also a possibility that the quartet will reject the proposal for a 1.5 percentage point rise in social security contributions, possibly asking for a smaller increase.

Another issue that may prove difficult to resolve is the minimum number of years needed for someone to qualify for a basic pension. The Greek government has proposed this be set at 15 years, while the lenders appear to favor 20 years.

Apart from pensions, the possibility of Greece needing to adopt more fiscal measures will also be the subject of negotiations. Athens insists that last year’s budget produced a 0.4 percent of gross domestic product primary surplus, rather than the expected deficit, and that there is no fiscal gap this year. The IMF is thought to be skeptical about this take and may ask for more spending cuts this year, as well as for 2017 and 2018.