Bailout exit scenario on the table

Greek and European officials are in the process of negotiating a bailout program exit next year for Greece that would involve new reforms in exchange for debt relief, according to European sources.

The exit being discussed would likely not be the “clean” exit of other countries such as Ireland and Cyprus that Greek authorities had hoped for but neither would it constitute a fourth bailout as some had feared would be the case, Kathimerini understands.

The solution being examined would be specially tailored to Greece’s situation, one high-ranking European official said. It would be adopted in the event that Greece completes a current bailout review by the beginning of next year and achieves a primary budget surplus of 1.75 percent of gross domestic product for this year.

It would be a scenario that would allow Prime Minister Alexis Tsipras to declare that Greece is emerging from its third bailout in August 2018, as promised, though it remains unclear what kind of foreign supervision would need to remain in place.

The other options include the so-called clean exit. However, this is considered unlikely as it would only be viable if Greece is able to cover its financing needs by tapping the international capital markets and that is considered unlikely.

Secondly, there is the possibility of a fourth bailout, which is considered not only politically toxic but also non-viable because it presupposes further rescue loans from European nations whose governments have already expressed their opposition to such a prospect.

A third option would be an exit together with a conditional credit line that Greece could tap in the event that it cannot access the money it needs on the capital markets. However this is believed to be less attractive politically as Tsipras has repeatedly stressed that the country will exit the third bailout without any further funding support, conditional or otherwise.

A European official yesterday stressed that the hardest part of the third bailout has been implemented and that Greece is on course to exit the program on August 20, 2018. The same official noted that the initiative by the current government to provide handouts to Greeks on low incomes resembled charity and that broader efforts toward social justice should be linked to growth-oriented measures.