Parliament’s budget office has warned the House not to succumb to political pressure for handouts once the country exits the bailout program in August, according to its quarterly report on the economy, published on Wednesday.
The head of the budget office, Frangiskos Koutentakis, said while presenting the report that the messages sent by the government after the end of the program will be crucial, adding that if it appears that economic policy is changing, Greece will face problems in the markets.
“You will be targeted by the markets. You will be viewed with suspicion. Economic policy should be prudent and careful,” he said.
“The first months following the completion of the program will be particularly challenging for the government, as it has to signal its intentions which will in turn determine the credibility of economic policy and the level of market yields,” the budget office, whose role is largely advisory, said in the report on the second quarter of the year.
“Consequently, it is critical that the risks stemming from political pressures for fiscal expansion and for slowing down the implementation of reforms should be kept to a minimum.”
Asked about the much-debated new pension cuts which have already been approved by Parliament and will kick in as of 2019, Koutentakis said their reduction is not necessary fiscally, but “politically” there is an agreement with Greece’s lenders on the issue.
As for Greece’s next market foray, the budget office said bond issues should be “well-designed and careful,” given the fact that there are no urgent financing needs that require hasty moves.
The report said the debt sustainability analysis contained in the recent report by the International Monetary Fund finds the debt sustainable until 2038 in the baseline scenario, a rather prolonged medium-term horizon of 20 years.
“However, the long-term doubts expressed in the IMF report may negatively affect markets and delay the upgrading of Greek sovereign debt by rating agencies,” it added.