ESM adds to chorus of warnings

Regling: Gov’t should not act without creditor consent, enhanced surveillance will go on for a while yet

LUXEMBOURG – European Stability Mechanism chief Klaus Regling yesterday reiterated the eurozone’s doubts over Greece achieving a primary budget surplus equal to 3.5 percent of gross domestic product after the handouts recently voted by Parliament.

“We are certain there is a great risk that Greece won’t achieve its fiscal targets,” said the German official, while adding that he had taken into account the position of the Greek government that the goals will be reached by year-end.

Regling told a press conference in Luxembourg that the requirement to maintain a primary surplus of 3.5 percent until 2022 was part of the agreement for debt relief, and that failure to make that level would lead to the freezing of the debt-lightening measures.

He went on to express his worries about the way the Greek authorities have ignored the creditors in voting for the controversially named “13th pension,” the reduction of value-added tax rates and the change to the law on the state asset utilization hyperfund, without any prior agreement with them.

Regling further referred to the decision by Athens to annul the reduction of the tax-free limit it had passed in 2017. “It is sad,” he said, as the expansion of the tax base would have strengthened growth, and expressed his disappointment that the decisions were made outside the procedure agreed. He also promised to return to these issues with the new government after next month’s election, which will be the administration that has to deal with the situation.

In its annual report published yesterday the ESM issued a warning about sticking to the agreed points, stressing that “the main successful reforms of the program ought to be retained, while cautious policies should be sought.”

The report further argues Greece will remain in the enhanced surveillance status, as “the existing vulnerable points and the difficult reform targets will require for some time closer surveillance for Greece than the other post-program countries.”