The long-awaited report by the European Commission and the European Central Bank on Greece’s economy, issued on Monday in Brussels, describes the prior actions required for 14.8 billion euros in bailout installments to be disbursed by March. However, it also warns of four risks to the bailout program, stressing that any failure would immediately entail fresh austerity measures.
The prior actions required for January are the passage of the tax reform bill through Parliament and an increase in electricity rates. These measures will allow for the disbursement of 9.2 billion euros, out of which 7.2 billion will go toward the recapitalization of banks.
February should see the revision of the midterm fiscal plan and the setting of ceilings on spending for general government entities, particularly local authorities and hospitals, for the next three years. That will see the release of another 2.8 billion.
In March, the government will have to complete its report on human resources at its ministries, which will determine the number of unnecessary staff and the figure of those departing per quarter up until end-2014. Pharmaceutical prices will also have to come down for the next tranche of 2.8 billion euros to arrive in Athens.
European authorities are worried however that legal interventions might hamper some of the measures, as in the case of the special property tax paid via electricity bills, which would demand the introduction of other measures to fill the gap. Other possible obstacles to the program include political instability, a greater-than-forecast recession and the insufficient implementation of reforms in areas which would involve a clash with vested interests.
The state’s reduced ability to enforce the reforms agreed upon is one of the problems cited by the Commission’s Task Force in a different report also presented on Monday. That also identifies the problems of extensive tax evasion and a lack of cash flow.
A senior Commission official admitted on Monday that the measures already agreed on for the reduction of the Greek debt are going to bring it down to 128 percent of gross domestic product in 2020, to secure its decline to 124 percent in 2020 and below 110 percent in 2022. The official added that more measures that have not been specified will have to be taken, but that the eurozone has committed itself to promoting them should this be required. It was through this guarantee that the International Monetary Fund has agreed to tone down its hard stance and allow for the disbursement of the bailout installment.