Troika wraps up mini-re­view be­fore Septem­ber visit

Financial Mirror (Cyprus) - - FRONT PAGE -

The Troika of in­ter­na­tional lenders wrapped up a brief as­sess­ment of the Greek ad­just­ment pro­gramme last week, leav­ing the coali­tion fac­ing an up­hill task to be ready for the in­spec­tors’ re­turn in mid-Septem­ber, when a much more sub­stan­tial re­view will take place.

The visit from the EU-ECB-IMF in­spec­tors was an un­usu­ally low-pro­file one to re­view the pace of re­forms and lay the ground for the more cru­cial au­dit of fis­cal tar­gets and fund­ing gaps, when talks on fur­ther debt re­lief are also ex­pected to be­gin.

A se­nior fi­nance min­istry of­fi­cial con­firmed the in­spec­tors’ visit had gone smoothly. “We had con­struc­tive talks, they wanted to take stock of where we are in terms of the (bailout) pro­gramme,” said the of­fi­cial.

The two sides held talks on pri­vati­sa­tions, struc­tural re­forms to make the econ­omy more com­pet­i­tive, tack­ling bad loans that are bur­den­ing lo­cal banks, and the state of pub­lic fi­nances, al­though no ma­jor de­ci­sions were taken.

Apart from com­plet­ing six “prior ac­tions” to re­ceive its next bailout sub-tranche of 1 bln eu­ros in Au­gust, Greece also has to com­plete some 600 other, less sig­nif­i­cant, ac­tions in time for the Septem­ber re­view. Fi­nance Min­istry of­fi­cials ad­mit­ted that this is a tall or­der.

Re­ports in­di­cate that in a bid to fa­cil­i­tate the Septem­ber re­view, Fi­nance Min­is­ter Gikas Har­dou­velis will pro­pose split­ting it into two parts. Ac­cord­ing to his plan, the first should fo­cus on the fis­cal tar­gets and struc­tural re­forms, while the other should con­cen­trate on the fund­ing gap, a re­port by MacroPo­ sug­gested.

How­ever, the fund­ing is­sue will de­pend largely on the out­come of the Euro­pean Cen­tral Bank stress tests in Oc­to­ber. Only then will Greece know how much, if any, of about 11 bln eu­ros in re­cap­i­tal­i­sa­tion funds re­main­ing it will need to boost lenders’ cap­i­tal ad­e­quacy. The rest could be used to cover the fund­ing gap.

The govern­ment does not want the troika’s re­view to be held up by the fund­ing gap is­sue be­cause this would also mean a de­lay in start­ing of­fi­cial talks on fur­ther debt re­lief. Eu­ro­zone lead­ers will wait for the con­clu­sion of the re­view be­fore dis­cussing how Greece’s debt load could be light­ened. Har­dou­velis, there­fore, is propos­ing that the talks be­gin as soon as it has been es­tab­lished that fis­cal and re­form tar­gets have been met.

Prime Min­is­ter An­to­nis Sa­ma­ras is adamant that he will not agree to a third bailout and the con­di­tion­al­ity that would come with it. He is fully aware that sign­ing a new deal would carry con­sid­er­able po­lit­i­cal cost at home.

The Wall Street Jour­nal re­ported that the eu­ro­zone con­sid­er­ing at­tach­ing terms to any debt re­lief pack­age.

Aside from the Troika’s tar­gets and the Eu­ro­zone’s de­mands, Sa­ma­ras also faces the chal­lenge of keep­ing an in­creas­ing fid­gety PASOK on board in the com­ing weeks. Since the Euro­pean Par­lia­ment elec­tions in May, when the new­comer cen­tre-left Olive Tree al­liance got 8% of the vote, PASOK and its leader Deputy Prime Min­is­ter Evan­ge­los Venize­los have be­come in­creas­ingly re­luc­tant par­tic­i­pants in the im­ple­men­ta­tion of the ad­just­ment pro­gramme.

The so­cial­ists have, for in­stance, pub­licly ques­tioned the pub­lic sec­tor mo­bil­ity scheme and dis­missal of civil ser­vants. Greece has to fire an­other 6,500 civil ser­vants this year but

is the ju­nior coali­tion part­ner is op­posed to this. PASOK is also push­ing for in­di­vid­u­als and com­pa­nies who owe taxes or so­cial se­cu­rity con­tri­bu­tions to be given more time to re­pay their debts.

There is also vis­i­ble scep­ti­cism within the New Democ­racy camp in the wake of the EU vote. The sub­se­quent cab­i­net reshuf­fle saw a num­ber of con­ser­va­tives rep­re­sent­ing the so­called “pop­u­lar right” en­ter the govern­ment and they have wasted no time in voic­ing con­cerns about fur­ther ad­just­ment mea­sures. The new In­te­rior Min­is­ter, Ar­gyris Dinopou­los, re­cently ar­gued that his party would lose votes if it tries to hike taxes.

Also, the process of eval­u­at­ing civil ser­vants has stopped in its tracks be­cause pub­lic ad­min­is­tra­tion of­fi­cials are re­fus­ing to co­op­er­ate with as­ses­sors.

These are signs that there is con­cern within the coali­tion that the coun­try will head to early elec­tions in March next year, when the Greek par­lia­ment has to elect a new pres­i­dent of the Repub­lic, and that the govern­ment should not rock the boat in the mean­time.

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