Government officials and representatives of Greece's creditors on Tuesday pushed on with negotiations aimed at reaching a staff level agreement before a summit of eurozone finance ministers next Monday, the first step toward the release of loans and talks on debt relief.
As negotiations on budget savings worth 5.4 billion euros are all but complete, the current talks are focusing on an additional 3.6 billion euros’ worth of contingency measures that Greece would have to implement if it misses budget targets in 2018.
The additional measures have been demanded by the International Monetary Fund, which believes that the 5.4 billion euros’ worth of measures set out in Greece’s third international bailout are inadequate for it to achieve a budget surplus worth 3.5 percent of gross domestic product in 2018.
Greek officials have instead proposed the activation of an automatic mechanism for cutting state spending in the event that the government misses budget targets.
According to sources, the IMF is still insisting on the contingency measures being voted through Greece’s Parliament, a demand that Athens rejects. However, the Fund is said to be considering Greece’s proposal for an automatic spending cutting mechanism.
Greek officials are keen to convince creditors that such a mechanism will be efficient and in exchange be exempted from legislating detailed contingency measures.
Foreign officials reportedly want details about areas of public expenditure that Greece wants to exempt from the mechanism; the education and health sectors are two areas that the leftist-led government is certain to want to protect.
Another issue said to have been raised by the IMF is the possible imposition of penalties on Greece if it fails to hit budget targets; these could include creditors withholding rescue loans.
At the end of this week, Finance Minister Euclid Tsakalotos is expected to have talks with representatives of some of his eurozone peers, including Eurogroup leader Jeroen Dijsselbloem, and representatives of Greece’s foreign lenders.
Reports about a possible meeting between Tsakalotos, Dijsselbloem, the French and German finance ministers and the heads of the European Central Bank and IMF had not been confirmed by late Tuesday night.
Tsakalotos is keen to secure creditors’ backing for Greece’s proposal for debt relief.
Meanwhile Prime Minister Alexis Tsipras is rumored to be considering a new round of talks with prominent European leaders in the coming days in a bid to secure their support for Greece’s position on the automatic spending cutting mechanism and on debt relief.
Legislation for the 5.4 billion euros in measures, chiefly pension reform and a tax overhaul, is expected to go before a vote in Parliament next week.