BUSINESS

Athens to ask for austerity relief

If measures are taken to ease the debt, there should be no need for primary surpluses to reach 4.5 pct of GDP By Sotiris Nikas

The government is planning to raise the issue of changing the fiscal targets when talks on the sustainability of the Greek debt begin at the end of August, in an effort to loosen fiscal policy after a long period of austerity.

A senior Finance Ministry official acknowledged on Tuesday that the issue ranks high on the government’s agenda. Although he said that the subject “has not been raised nor discussed” with the country’s creditors, he poignantly added that “everything will become part of the negotiations on the debt.”

The official further added that there will be five parameters that must be reviewed in examining the sustainability of the debt:

The macroeconomic scenario – i.e. the course of the gross domestic product: The better the economy gets, the smaller the debt-to-GDP ratio will become. The ministry expects GDP to perform even better than expected this year thanks to the payment of outstanding debts to the private sector.

The funding gap: The Greek program has its funding secured for the next 12 months, but what happens after that will have to be examined, and the question is: At what cost?

The fiscal targets: The size of the primary surpluses will go a long way toward determining the level of the debt’s annual reduction, as the bigger the surplus, the more funds Greece will have to repay debt.

The course of the privatizations program: The revenues from the sell-offs have been factored into the repayment of the country’s debt. If the projected revenues are not collected, then the debt will not be reduced as planned.

The eurozone decisions regarding the further lightening of the Greek debt.

In this context, when talks start in August and provided that the eurozone does take new measures to ease Greece’s debt, the government will request a change in the fiscal targets set. According to Athens, since projections for the course of the debt will point to a faster reduction in the coming years thanks to the new measures, there will be no need for securing primary surpluses of 4.5 percent of GDP from 2016 to 2020.

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