Clean exit narrative tarnished
Contrary to the gov’t rhetoric, Tsakalotos says Greece will stay under tight supervision in the post-bailout era
Finance Minister Euclid Tsakalotos punctured the government’s narrative of a clean exit from Greece’s adjustment program yesterday, telling the Financial Times that creditor monitoring missions to the country would likely be more frequent after the country’s memorandum expires in August than in other post-bailout countries.
“It is likely to be a case of three or four visits instead of two,” he said. Two is the customary number of missions carried out per year for a given period of time.
His comments were seen as a bid to lower expectations at a time when other members of the government have sought to push the narrative of a clean exit.
What is considered certain is that Greece’s post-bailout supervision will include terms and conditions that other countries that had bailouts – Cyprus, Ireland and Portugal –- did not have to sign on to.
Up until now, the number of visits to Greece by the institutions has been four per year – one every three months – and, according to Finance Ministry sources, this will not change after the bailout expires.
Meanwhile, according to two sources cited by Reuters, Greece could be faced with the prospect of losing access to cheap central bank money after its bailout expires. Reuters said this could potentially raise funding costs for the country’s banks and distance Greece from the chance of taking part in the European Central Bank’s 2.55-trillion-euro bondbuying program.
The government’s professed goal for a clean exit without a precautionary assistance program would, the news agency said, boost confidence in Greece’s finances, but it would exclude Greece from an ECB exemption from its minimum credit requirements. This means that its “junk” rated bonds could no longer be accepted as collateral in regular funding operations, the agency said.
In contrast to the government’s narrative, Greek central bank chief Yannis Stournaras has repeatedly insisted that Greece will need a precautionary credit line.
Last week he said that the government must maintain the ECB waiver. However, he noted that a clean exit would make that impossible. Meanwhile, today’s Eurogroup meeting in Sofia, Bulgaria, is expected to discuss Greece’s key demand of debt relief and the conditions that the country must meet.
The main goal is for a debt deal to be agreed upon in order to satisfy the International Monetary Fund and help bridge the gap with Berlin and other Northern European countries that want debt relief measures linked to strict supervision. Getting the IMF on board is considered crucial as it will signal to the markets that the Greek debt is sustainable.