“Avoid dramas, do not allow the reemergence of doubts about the government’s determination to implement what has been agreed, eschew illusions and take measures so that the Programme, which has started to yield results, is not derailed. This is the message of the Commission to the Greek Prime Minister, Antonis Samaras, during his meeting with the president of the Commission, Jose Manuel Barroso, on Tuesday, September 17, in light of the arrival of the head of the Troika audit in Athens. Despite these warnings, however, the atmosphere at last week’s meetings of the prime minister with the European leadership was extremely good. For example, those who have personally experienced the turbulent relations of Joaquin Almunia, vice-president of the European Commission, with the governments of our country, assert that rarely has the leading official of the Community been as satisfied after meeting the respective Greek prime minister. This positive atmosphere creates optimism that common ground will be found, both in the ongoing negotiations on the fate of public companies LARKO, ELVO and EAS, and in the plans to restructure Greek banks, even though the technocrats of the Directorate General (DG) for Competition traditionally adopt a tougher stance in relation to politicians. Notably, the three Greek industries will be required to repay, always according to the Commission, hundreds of millions of euros received as improper state aid; since they are loss-making, however, this money does not exist. Hence, it is very unlikely that they will survive in their current form.
Nevertheless, the main concern in Brussels is the possibility of a new round of retractions in Athens, which will lead to months of thriller-negotiations with the Troika, whereas the ever-existing danger of political destabilization is always in the back of decision-makers’ minds. More specifically, there is skepticism about whether the government will be able to smoothly implement the mobility scheme for 25,000 civil servants by the end of the year, with no tension and backtracking. Furthermore, reduced participation in debt settlement programmes, for debts both to social security funds and to the state, as well as postponement of tax burdens towards the end of the year, are raising concerns about a sudden derailment of revenue, given that “the framework for penalties to be imposed on debtors who do not meet their obligations is not convincing enough,” according to Brussels.
In terms of the actual purpose of the current negotiation, there is satisfaction mainly with regard to the changes that have been made already, towards liberalization of the labor market. The same satisfaction goes for the colossal fiscal adjustment, despite the disappointment by the -so far- meager results of restructuring the tax-collection mechanism, which are covered by the under-execution of the budget. For 2014, the basic pending fiscal issue, concerns the new way of estate-tax-collection and the abolition of the special fee (EETIDE), which is included in electricity bills and characterized by high collectability. For 2015, however, the Troika considers it appropriate that new and substantial measures are taken, in order to cover a fiscal gap, which in the previous assessment was calculated at approximately 4 billion euros, and is part of the country’s obligation to maintain huge primary surpluses every year, in order to reduce debt. Our partners will not persist in making horizontal interventions to cover this gap, but they will rather request specific commitments to reduce subsidies to the local authorities and to further decrease defense spending, as well as to close or restructure loss-making public companies, and so on. In other words, “structural interventions with a positive budgetary balance” will take place, as the prime minister said in Brussels; the Troika however will likely require that this balance is measurable.
Another issue that worries the Troika is the course of privatizations, as indicated by the appeal of the president of the Commission, Jose Manuel Barroso, in the joint press statement with Antonis Samaras last Tuesday. Especially for the state’s real estate, our creditors estimate that Greece has no excuse, because the delay is not so much a problem of lack of interest on the side of investors, but rather is due to the fact that exploitable estate are not yet ready for sale, because of pending issues related to urban planning or ownership status. The constant delays in meeting the privatization objectives create a problem for projections on the sustainability of the Greek debt as well, although this issue will be examined at the end of the assessment.
Provided that the backlog regarding the fate of ELVO, EAS and LARKO, is addressed, that the state sets its debts to EYDAP and EYATH (National Water Supply Companies of Athens and Thessaloniki), in light of the privatization of the two companies, that the new code for lawyers is approved and the mobility programme for 12,500 civil servants is completed, then the Eurogroup, which is bound to be held in Luxemburg on October 14, will approve the disbursement of one billion euros from the support mechanism, i.e. the amount pending since the previous assessment. Then, the Troika will return to Athens before the end of October, in order to complete the new compliance report of the Greek programme and to define with precision the funding needs of our country and the new sustainability report. Only then can discussions begin regarding a “Third Greek Programme”, which according to planning are bound to be completed in the Eurogroup of November 9.