After tranche, government preparing for additional pre-election benefits

The government appeared to be preparing for another round of pre-election handouts on Wednesday after the European Commission indicated that Greece had honored most of its bailout-related commitments, paving the way for the release of around 1 billion euros in funding.

The final decision on the release of the tranche is to be made at a summit of eurozone finance ministers in Bucharest on Friday.

However, it is widely expected to be positive following the upbeat assessment of Wednesday's Euro Working Group and the Commission’s observations which were set out in a report that also underlined certain concerns, particularly as relates to a new legal framework for the protection of overindebted borrowers.

In comments to Sto Kokkino Patra radio station, Finance Minister Euclid Tsakalotos sought to strike a balance between following through on pledges to offer handouts and observing the fiscal constraints pointed to by creditors.

The authorities will facilitate repayment of debts to social security funds and the tax office, he said, but this help will be subject to strict preconditions.

The ministry’s aim, he said, is to “help people who really have a problem [in repaying debts] and to not help strategic defaulters, who have money but don’t want to pay.” Increases to widows’ pensions are also on the cards with the reform expected to be approved in Parliament in the coming days.

However, Tsakalotos doused speculation about the distribution of an Easter bonus to civil servants and public sector retirees, noting that this could have a negative impact on fiscal targets.

Athens is keen to secure the green light from Friday’s Eurogroup to send a positive message to the markets before it issues a new government bond.

Moreover, it is expected to seek the approval of the European Stability Mechanism for the early repayment of some of its loans from the International Monetary Fund.

The leftist government wants to distance itself from the IMF – regarded as the toughest of Greece’s foreign creditors.

However, for this to happen Greece would have to repay the full outstanding debt of 9.5 billion euros to the Fund.

As Germany is keen for the IMF to continue supervising Greece’s economic reforms, the likeliest scenario is that Athens will seek to repay about half the outstanding debt to the IMF.