Monday, 22 January 2018

Greece almost clears penultimate hurdle

Greece has almost cleared its latest hurdle on the road to graduating from economic oversight by its creditors, but not quite. Monday's meeting of euro area finance ministers, or Eurogroup, declared a political agreement, but in order to disburse a €6.7bn loan instalment Greece needs to stay abreast of interest payments, it wants to see evidence that certain measures are being implemented, not simply approved in parliament. 

First, it wants to see that a new law enabling banks and tax authorities to foreclose on homes and sell them online will produce "a continuous and unimpeded flow of electronic auctions". Until a January 15 bill went through parliament, auctions were carried out in physical courts. Protests by homeowners and sympathisers often disrupted proceedings, and by intimidating notaries-public, put a stop to them for all of last year (see video below).

The tranche of €6.7bn breaks down as follows: 
- €3.3bn cover Greece's debt servicing needs to the end of June.
- €1.9bn are to go towards a rainy day fund, which Greece needs to have in place in order to graduate from its fiscal adjustment programme in August. 
- €0.5bn will go towards payment of half the government's debts to its suppliers, a cash injection to the Greek economy. 
- €1bn will be paid out at the end of April, once the government has paid off its outstanding debts to suppliers. 

The Eurogroup also wants to see progress on privatisation. The highest profile selloff in 2018 is that of the Public Power Corporation, plagued by controversy for years.

Greece is meant to graduate from its fiscal oversight by the Eurozone and the International Monetary Fund, its two main creditors, in August, following which it hopes that its massive outstanding debt of €332bn will be rescheduled. The IMF says that without further rescheduling, Greece won't be able to repay its debts after 2020. 

The Eurogroup's incoming chairman, Portugal's former finance minister Mario Centeno, offered promises to this effect: "We will look into a mechanism that will link debt relief to growth developments," he said, but warned that, "a sizeable primary surplus and reform momentum must stay on and outlive the programme in order to unlock growth potential and regain investors' confidence." 

Greek finance minister Euclid Tsakalotos said he was satisfied with the outcome. "It was a point of great encouragement for us that the final paragraph of the communique mentions a working group, which will specify the debt measures in terms of what we call the French Mechanism." 

By "French Mechanism", Tsakalotos was referring to a mechanism demanded by Syriza since it took power in January 2015, whereby Greece would repay its debt in proportion to its GDP growth. "There will be a certain amount of debt relief," he explained, "and following that, if growth is disappointing, there could be some further relief." 

Tsakalotos ruled out a line of credit for Greece after it graduates from fiscal oversight, saying this will probably be replaced by its new rainy day fund. 

He also said that in order to graduate, Greece will have to come up with its own plan for growth and development of the economy. This, he said, has already begun in the omnibus bill passed on January 15. That bill re-establishes the national land register, begun to little effect in the previous decade, delineating forest and coastal land from land that may be commercially developed. This delineation has been a long-standing demand of the business community, since many domestic and foreign investments - especially in tourism - have stalled on the inability to secure planning permission. 

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