Not everyone in the government shares the optimism that Prime Minister Alexis Tsipras expressed recently that Greece will be able to achieve a “clean exit” from the bailout program in August 2018, in other words without the support of a credit line.
Finance Ministry officials are preparing for the start of the third review, which involves pushing through a number of prior actions that have to be completed. They are also preparing new legislation and planning for the possibility of Greece needing a credit line after the bailout program ends. This would come with conditions, although they would be less strict than the terms Athens currently has to meet.
In its strictest form, the European Stability Mechanism’s credit line, or ECCL, foresees a quarterly review.
It is said that finance ministers are always more conservative than their prime ministers and it appears that Euclid Tsakalotos is no exception.
For Greece to make a clean exit from its program, it needs the full confidence of the markets so that it can borrow at a reasonable rate. Sources on the institutions’ side do not believe this will be possible. The credit line would provide some security, helping secure better borrowing terms from the market.
Exactly what will happen, though, is still under discussion. The third review is expected to begin after the German elections, which are scheduled for September 24. According to sources, though, the Greek negotiating team will hold preliminary talks with the lenders toward the end of August or beginning of September either via teleconference or in Brussels. The aim of the meeting will be to set a timetable for the negotiations.
The next Euro Working Group is due to take place on September 4, when officials are expected to discuss the implementation of the commitments that Greece has made. This will be followed by an informal Eurogroup in Estonia on September 15.
The government does not expect the review to be a walk in the park. In fact, sources suggest that Finance Ministry officials expect several issues, such as a cuts to benefits, will be tricky. Nevertheless, Athens aims to complete the review by the end of the year. This will involve wrapping up 90 out of 113 prior actions, sources say.
The Finance Ministry does not foresee the International Monetary Fund asking for additional measures in 2018, even though the IMF does not expect Greece to reach its 3.5 percent of GDP primary surplus target. Athens does not rule out the possibility that the IMF will ask for the reduction to the tax-free threshold to be brought forward by a year and implemented in 2019, along with the planned pension cuts.