Greece’s creditors were taken aback by the pledges of Prime Minister Alexis Tsipras on Tuesday for handouts, not only because there had been no prior communication with them, but also because they do not agree with the policy mix or the apparent intention of changing the primary surplus target from 2020.
If there is one commitment on which the creditors have insisted on after Greece exited its bailout last August, it is for a primary budget surplus of 3.5 percent of gross domestic product at least up to 2022. Bond market sources noted on Wednesday that if this pledge is forfeited, if it goes down to 2.5 percent of GDP as Tsipras said on Tuesday, the debt sustainability conditions agreed cease to apply.
This negative climate was conveyed by sources around the European capitals, though the official stance of the creditors was more contained in view of the upcoming European elections and in anticipation of clarifications from Athens.
The measures announced by the prime minister will be “assessed based on the adherence to the agreed fiscal targets and to the pledges Greece has made to the Eurogroup for the period after the program,” said a statement by the creditors’ mission chiefs as they concluded their visit to Athens on Wednesday, in the context of the third post-bailout assessment. The mission was rather turbulent, as the creditors’ representatives were only informed of the planned reduction of the primary surplus targets after they arrived in Athens.
Likewise, European Commission Vice President Valdis Dombrovskis told Bloomberg that it is important for Greece to remain focused on the agreed fiscal targets and that there should be more in-depth discussion with the Greek authorities “over what exactly they have in mind.”
European officials told Kathimerini that the timing of the government pledges is not at all coincidental, stressing that less than 20 days before the European elections, no member-state would like to add Greece to the list of EU challenges.