European Commission report to push for Greek reforms

A European Commission compliance report due to be released Wednesday is expected to send a stern message to the Greek government to boost its economic reform effort which, as usual, has been beset with delays.

The report is expected to point to progress in some areas while urging the quick completion of pending prior actions ahead of a summit of eurozone finance ministers scheduled for March 11.

Athens is keen to get a positive assessment at the Eurogroup and secure the release of 1 billion euros, 750 million euros of which is profits on Greek bonds held by eurozone central banks with the remainder coming from the waiver of the step-up interest rate margin on part of the eurozone loans.

Although Greece does not urgently need the money, thanks to its multi-billion-euro cash buffer, it does want a positive outcome at the Eurogroup to reassure the markets and pave the way for authorities to issue a new bond, probably next month.

However, the timely completion of outstanding prior actions appears unlikely, with one European official saying Greek authorities would most likely not manage it in time for the Eurogroup.

A key sticking point is the legal framework for new legislation regarding the protection of debtors’ primary residences that would replace the so-called Katseli law.

Greece’s creditors are concerned that the proposed framework serves to protect strategic defaulters and will likely not reduce nonperforming loans, which burden Greek banks more than any other European country.

They also object to the fact that protection would extend to cover corporate loans secured against primary residences and that the proposal is that protection should apply for properties worth up to 250,000 euros, which they regard as a high figure.

Other problems include delays in the state’s repayment of debts to third parties and in privatizations, notably the tender for the concession of the operation of the Egnatia Odos highway.

Generally, the climate is not particularly warm toward Greece as recent decisions by the government appear to be geared toward elections, most recently the 11 percent increase in the minimum wage and before that the decision to extend a discounted value-added tax rate on certain islands.