Deal reached with lenders on primary budget targets for 2015-2018

The Greek government agreed with its creditors on the primary budget targets for 2015-2018, according to government sources cited by the Athens News Agency on Tuesday.

An agreement should keep the country in the eurozone and avert bankruptcy with an August 20 default looming.

The two sides agreed on the following targets for the primary budget: - in 2015, a primary deficit of -0.25% of GDP; - in 2016, a primary surplus of +0.5%; - a primary surplus of +1.75% in 2017; and, - a primary surplus of +3.5% in 2018. The sources underlined that there would be no new measures introduced in relation to fiscal targets for the years 2015 to 2016.

The meeting has now completed a long stretch of 17 hours since it began on Monday, with a brief break the same day to update the cabinet at a meeting chaired by Prime Minister Alexis Tsipras at the government’s Maximos Palace.

According to sources, the two sides have agreed on the majority of issues. The pending issues currently being discussed include 90 bln euros of non-performing “red” loans (which will be resolved after the banks’ stress tests in late August and their recapitalisation by end of the year), a privatisation fund (which will oversee 50 bln euros of assets and will be based in Athens), and the deregulation of the energy market.

Greece needs to reach an agreement on its third bailout by August 20, when it must repay EUR 3.4 bln to the European Central Bank.

“There are issues (the creditors) want to discuss again and again, but I think there should be optimism that there will be a deal soon... I don’t know if it will be tomorrow morning, but soon, it will be soon,” Finance Minster Euclid Tsakalotos said.

The talks between Tsakalotos, Economy Minister Giorgos Stathakis, and the ECB, the International Monetary Fund and the European Stability Mechanism aim to finalise the list of new reforms to be required of the Greek government in exchange for a lifeline of up to EUR 86 bln.

But Germany may stand in the way of a full disbursement of the third bailout, which comes on top of two earlier rescue packages totalling EUR 240 bln.

Appearing to throw cold water on the positive comments from both sides, German government spokesman Steffen Seibert told reporters: “The principle speed’ applies here in particular.”

Berlin favours a stopgap solution such as the short-term EU bridging loan of EUR 7 bln that enabled Greece to meet debt payments to the IMF and ECB in June and July.

German MP Ralph Brinkhaus, a top official of Chancellor Angela Merkel’s CDU party, said earlier on Monday that such a solution would be “better than a bad agreement”.

On the back of expectations of an imminent agreement, the Athens stock exchange on Monday jumped 2.06%, its third day of gains after losing nearly two thirds it value when it reopened last week.

Greece and its creditors are yet to announce a consensus on other issues, including raising a solidarity tax on large incomes and VAT taxes on private studies, petrol for farmers and beef.

Any decision affecting farmers carries political risk and Tsipras last week promised to extract as many concessions as possible from the creditors.

‘thoroughness

over

On Monday, the prime minister pledged to cut lawmakers’ tax breaks and ministers’ salaries in a “symbolic” move to appease Greek society.

“When the issue of scrapping tax breaks for farmers falls on the negotiating table, we cannot pretend not to care about our own tax breaks,” Tsipras said.

The Greek parliament may vote on the accord on Thursday, after which eurozone finance ministers could be asked to approve it on Friday.

Tsipras, meanwhile, is under pressure from many in his radical left Syriza party who say the new accord will pile further austerity on a weakened economy and goes against the party’s campaign pledges.

But with his popularity among Greeks still high, Tsipras has warned the dissidents of early elections in the autumn if they continue to resist the measures.

Former energy minister Panagiotis Lafazanis, who is opposed to the new bailout agreement, has dismissed it as “a negotiating fiasco” and said Tsipras could not “avoid the outcry by resorting guiltily and hurriedly to elections”.

Iskra, a website of the Lafazanis-led Left Platform, the anti-euro group inside Syriza, on Saturday raised the prospect of snap elections as soon as the first half of September.

Quoting anonymous government sources, the website said the plan was to rush the bailout accord through parliament and then immediately call for snap elections in order to “purge” MPs who oppose the new deal.

When creditors agreed in July to negotiate a deal aimed at keeping it afloat and in the euro zone, Greece committed to implementing major reforms, such as scrapping early retirement, by the end of October. Lenders want, for example, an increase in the retirement age to 67 from the nominal 62 that falls significantly depending on the number of years worked and family status.

Technical teams also discussed tax, justice and corruption issues and about setting up a new Greek privatisation fund and about bad loans.