Athens in damage control mode after Brussels

After the government backed down on its vow not to take new measures at yesterday’s Eurogroup, its number one priority now is damage control.

In the runup to yesterday’s meeting of eurozone finance ministers, Athens had insisted it had drawn its “red lines,” but it left Brussels having promised its EU partners that it will legislate measures after the current bailout program expires in 2018, in exchange for the return of technical experts to Athens in the bid to conclude the second review of the country’s third bailout.

Faced with the challenge of explaining its turnaround and agreement to take new measures to an increasingly disillusioned electorate and lawmakers of ruling SYRIZA and Independent Greeks (ANEL), the government is using the term “neutral fiscal balance” in an attempt to sweeten the pill. According to government sources, the term essentially means that for every euro saved from the new measures, there will be equivalent reductions in value-added, corporate or property taxes.

In other words, the government’s narrative is that even though new measures will be implemented, these will be neutral as their burden will be canceled out by tax relief.

Senior government officials were also busy laying the groundwork last week, saying that the government may have to accept new measures “for the good of the country” as the protracted negotiations to conclude the review were having a negative impact.