Greece beats a key bailout target but faces hard choices
Greece has beaten a key bailout target for its public finances, but will still face some painful choices as it tries to negotiate with creditors how much more budget austerity it should impose on its people in coming years.
Greece’s independent statistics agency said Friday that the country has posted a high primary budget surplus — that is, excluding debt servicing costs — of 3.9 percent of gross domestic product in 2016.
The surplus figure could provide some relief for the country’s left wing government as it struggles to overcome a disagreement with bailout lenders on unfreezing its rescue loans. The country would need new loans by July, when it faces a spike in its debt repayments.
The primary surplus target set by lenders had been 0.5 percent of GDP.
Finance Minister Euclid Tsakalotos is in Washington attending an annual meeting of the International Monetary Fund, and will hold at meetings with bailout lenders to try and end the impasse and reach an agreement in the next month.
Greek primary surplus figures — a measure of how much the country is spending within its means — are closely watched by lenders who want Athens to tighten fiscal controls after the current bailout program ends next year.
“The primary surplus figure is indeed impressive since it is well
above the target of 2016,” said Argyris Papastathis, a financial commentator at Greece’s top selling weekly Protothema newspaper.
“The weak point for the government is that the surplus largely relies on over-taxation. That hurts the real economy and carries a political cost in terms of public sentiment.”
After pledging years of draconian spending controls, Prime Minister Alexis Tsipras has been forced to abandon earlier promises to ease austerity, and is trailing badly behind the opposition conservatives in opinion polls.
Bailout inspectors from the IMF and European Union institutions are expected to return to Athens next week to discuss how big future primary surplus levels should be and whether to further cut pensions and job protection rules.
The IMF and Greece’s eurozone bailout creditors also remain at odds over surplus targets and the extent of debt relief promised to Athens.
“We still need to discuss and understand the primary surplus objective that would be assigned to the Greek economy, which, in our view, and in order to determine sustainability, would have to be reasonable,” IMF Managing Director Christine Lagarde said Thursday.
“That will indeed determine the amount of debt restructuring that would be needed for the debt of Greece to be sustainable in the medium and long term.”