If Athens fails to complete the second set of 12 prior actions required for the release of 1 billion euros of bailout funds within a week, this sub-tranche will only become available after a time-consuming process and under different terms, a European Union official warned on Thursday, adding that the formal review is now expected to take place in February.
While the completion of the first review had been scheduled for the end of the year, the same official said that it is now more likely to take place in February, not in January as Athens expects.
The International Monetary Fund said on Thursday it will only make its decision whether to participate in Greece’s new bailout program after its first review, so that will probably not happen before February.
The sticking points in the negotiations between Athens and its creditors will likely be the social security reform, farming taxes and the introduction of medium-term fiscal targets.
Regarding the issue of the Greek debt, the EU official explained there is no pressure from the IMF about a nominal haircut, adding that “if the review is not completed and the payments within one year are not seen, [the Fund] will realize there is no financial logic in a haircut.” The impact of the social security reform and the implementation of the reforms proposed by the Organization for Economic Cooperation and Development (OECD) will also be factored in, as will the general application of changes, as “they affect growth and fiscal interventions,” the official said.
He noted that one should not expect any decisions or political conclusions at Monday’s Eurogroup meeting of finance ministers. The official added that at the moment Greece and its creditors are in the middle of a process with 2 billion euros already having been disbursed, the results of banks’ stress tests known, two banks not requiring any state support, one bank having had its recapitalization determined, and the results for another set to be known fairly soon.
As for the setup of the new privatizations fund that must take shape by December 11, the EU official noted that if banks do not utilize most of the 15 billion euros set aside for their recapitalization, the money that the new fund will have to collect could also be reduced, although that would require further negotiations.