The financial cost of the delays in the bailout review procedures could turn out to be greater that the possible benefits – that may also prove temporary – of a final agreement on the adjustment program, according to the quarterly report by the Parliament’s Budget Office that was released on Friday.
The report warned that this slowdown in the streamlining process is set to affect other economic factors, such as taxation, generating a new vicious cycle and a long period of stagnation.
Even if the second review is completed, the Budget Office added, the implementation of the third bailout program and the disbursement of the tranches due are not guaranteed for two main reasons. The first is that it will take time for the full application of the legislative measures already voted on in order for the second review to be completed, to say nothing of any pending issues that may be postponed until a later phase. The second is that straight after the second review comes the third, which will have to be wrapped up in a very tight time frame.
In addition to any issues that remain outstanding from the second review, the third will concern new privatization projects, further reforms in social security, the drafting of a new tax code to simplify legislation, and the alignment of property rates used for tax purposes (known as objective values) with going market rates.
Crucially, the report includes a chapter titled “Fourth Bailout.” This analyzes Greece’s funding needs after 2018 and what an additional program would entail. A new loan request will be sent to the European Stability Mechanism (ESM) in 2018, the report projects, and that of course would be accompanied by a new bailout program, and in case there is no agreement with the ESM for financing by the markets, the analysts expect a Greek bankruptcy that would result in an exit from the eurozone.
The report goes on to assess the consequences of a bankruptcy, speaking of a slump in output, a bank crisis, a stop in the inflow of European Union funds, uncertainty, national currency devaluation and spiraling inflation, to name but a few.