Despite appearances, the government has actually assured European Stability Mechanism (ESM) Managing Director Klaus Regling that it will not go back on its commitments, the eurozone official revealed on Friday after his meeting with Finance Minister Euclid Tsakalotos.
This way the ESM chief indirectly banished the expectations some government officials are cultivating that there will be a way to avert pension cuts – or at least contain them – from January 1, 2019, as according to sources, in his meetings with officials in Athens it has become clear that the commitments agreed on include this measure too, as well as the reduction of the tax discount from January 1, 2020.
Regling acknowledged that “there was some concern in the markets and certain European parliaments” that Athens might not fulfill its pledges. However, he added, after his visit to Athens he has once again ascertained the government’s commitment to the reforms agreed. “There is a clear commitment by the government that it will not go back, I have no indication to the opposite,” said Regling.
A little later Tsakalotos told a press conference that the government has committed itself in advance through the midterm fiscal plan voted through this week on the destination of the excessive primary surplus cash.
According to the fiscal plan, the primary budget surplus overrun of 2019 (about 700 million euros) is exclusively destined for financing tax exemptions. From 2020 the additional revenues will be split between tax exemptions and social expenditure, while the 2018 overrun of just 107 million euros will be insufficient to offset the planned pension cuts.
As regards the post-bailout surveillance, Regling reiterated it will be stricter for Greece as this country has received more in loans than the other countries that emerged from the bailout process. However, that does not constitute a new bailout program as there will be no new terms imposed. What will be monitored is whether the existing commitments are met, he stressed.