Greece will from now on be under the constant threat of new fiscal measures – i.e. cutting expenditure or increasing taxation – according to the draft of the new memorandum Athens has agreed on with its creditors, who will be closely monitoring the country’s implementation of the new bailout terms.
The draft dated November 27 – one day after the Eurogroup agreement – reveals it is possible that in the first quarter of 2013 the government will have to take fresh measures for 2014, while it is made clear that by August 2013 Greece must make specific plans for the measures to be implemented in 2015 to secure a primary surplus of 3 percent of gross domestic product.
The draft also describes in detail the monitoring and automatic correction mechanisms for any problems or shortfalls that may emerge.
For instance, the agreement provides for an automatic mechanism for increasing primary surplus in case of a shortfall in revenues from privatizations. There is, however, a ceiling of 1 billion euros per year, above which the primary surplus cannot grow regardless of the lagging in the sell-off program.
According to sources, the technical teams of the troika – which comprises the European Commission, the European Central Bank and the International Monetary Fund – will now visit Athens once a month to establish the course of the memorandum’s implementation. The Finance Ministry will also have to send reports to the troika on a regular basis concerning the execution of the budget and the general implementation of the agreement’s provisions. Some of these reports will have to be sent on a weekly basis.
The troika inspectors will pay especially close attention to the clauses of the new tax bill, once it is voted by Parliament, to establish whether the fiscal adjustment is secured in the way it has been planned for 2013 and 2014. The memorandum provides for an increase in tax revenues by 1.67 billion euros next year and by 1.82 billion in 2014.
The new memorandum will be finalized this month, once the Greek bond buyback program is completed and the debt sustainability report is approved by the eurozone and the IMF.