Vote threat­ens bailout pro­gram

An­nounce­ment of elec­tion means it will be hard to stick to timetable agreed with Greece’s cred­i­tors

Kathimerini English - - Front Page -

The econ­omy is on au­topi­lot again thanks to po­lit­i­cal de­vel­op­ments. The dif­fer­ence is that now, thanks to the cap­i­tal con­trols, it is much more vul­ner­a­ble than be­fore, while there are strict dead­lines in place which, if not met, will cause com­pli­ca­tions.

Un­til the elec­tions, and with the pre­con­di­tion that a sta­ble gov­ern­ment with a pro-Euro­pean stance will be formed im­me­di­ately af­ter, all mem­o­ran­dum-re­lated pro­ce­dures are on hold. The timescale that has been agreed with Greece’s cred­i­tors fore­sees the first assess­ments by the end of Oc­to­ber. By then, a se­ries of painful mea­sures will need to be adopted, mainly re­lated to tax and in­sur­ance.

The main­te­nance of the timescale, which doesn’t al­low for any dead pe­ri­ods, is es­pe­cially doubt­ful now. This will cause de­lays to the cash in­jec­tions of Septem­ber and Oc­to­ber to­tal­ing 3 bil­lion eu­ros, which were pri­mar­ily to be used for the pay­ment of ar­rears by the state to the pri­vate sec­tor.

Any hopes that Greek banks could go back to be­ing fi­nanced di­rectly from the Euro­pean Cen­tral Bank rather than through the costlier Emer­gency Liq­uid­ity As­sis­tance scheme have also been put on hold. The ECB re­voked the waiver on Greek bonds as col­lat­eral for liq­uid­ity from lo­cal banks in Fe­bru­ary. The agree­ment of a new pro­gram and dis­burse­ment of the first 10 bil­lion eu­ros needed for re­cap­i­tal­iza­tion meant that there were hopes the waiver would ap­ply again from early Septem­ber.

The re­cap­i­tal­iza­tion of banks must be com­pleted by the end of the year, since from 2016 a new EU di­rec­tive will be im­ple­mented which pro­vides for a hair­cut on de­posits over 100,000 eu­ros. Stress tests will con­tinue nor­mally, but the way in which re­cap­i­tal­iza­tion takes place re­quires a po­lit­i­cal de­ci­sion by Oc­to­ber.

The im­ple­men­ta­tion of the Na­tional Strate­gic Ref­er­ence Frame­work (ES- PA) pro­gram is also on hold. Funds to­tal­ing 1.4 bil­lion eu­ros from this pro­gram are in dan­ger of be­ing lost, and the Min­istry of Fi­nance is in dis­cus­sions with the Euro­pean Com­mis­sion to pre­vent this.

How­ever, the busi­ness com­mu­nity ex­pects the rel­a­tively short cam­paign pe­riod, the prospect of a new gov­ern­ment that will stick to the agree­ment and the so far sub­dued re­ac­tions from Greece’s cred­i­tors will limit the im­pact on eco­nomic ac­tiv­ity.

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