Inspectors back for post-bailout assessment amid debt warnings

As foreign auditors returned to Athens on Monday, for the first assessment of Greece’s finances since the country exited its international bailouts last month, a top European official stressed that debt relief will depend on the continuation of economic reforms.

Technical teams started their inspection at the General Accounting Office on Monday, laying the groundwork for the mission chiefs who are due in the Greek capital on Wednesday for talks with ministers on the budget and reform commitments.

Those talks come in the wake of pledges over the weekend by Prime Minister Alexis Tsipras for cuts in taxes and social security contributions as well as rent subsidies for poor households and other benefits.

Tsipras also vowed to press European officials to suspend a further round of a cuts to pensions, due to come into effect in January, claiming that the measure is not necessary for Greece to hit a primary surplus target of 3.5 percent. 

Although certain European officials have indicated that some flexibility might be possible, it remains unclear whether there is any scope for flexibility with pension payments.

The European Stability Mechanism could freeze Greece’s debt relief measures if the government starts rolling back reforms, its head Klaus Regling said in an interview with Austrian newspaper Die Presse, published on Sunday.

“Greece needs to continue the reforms. We are a very patient creditor. But we can stop debt relief measures that have been decided for Greece if the adjustment programs are not continued as agreed,” he said, responding to a question over the possibility of Greece straying from fiscal targets set by creditors.

“The debt level appears to be frighteningly elevated,” he added. “But Greece can live with that as the loan maturities are very long and the interest rates on the loans are much lower than in most other countries.” 

Regling said four of the five “crisis countries” are “in better shape today than most of the other euro-area countries due to economic reforms,” referring to Portugal, Spain, Ireland and Cyprus.

“Hopefully, Greece will also become a success story,” he added.