Tug of war with creditors starts

Tug of war with creditors starts

The creditors’ technical experts will arrive in Athens this week, as the government is adjusting its estimates on the budget’s performance last year with the aim of striking a deal with the missions from the eurozone and the International Monetary Fund.

The aim of the technical mission is to record progress mainly on the fiscal front so as to pave the way for the return of the creditors’ main representatives. It’s possible that the consultations will begin in a tough climate on Tuesday, as the IMF is insisting on its demand for tough measures this year, while decisions by the Council of State, the country’s highest administrative court, against a number of salary and pension cuts could inflate the sum of measures that the creditors will deem necessary for 2016 and the following years.

The aim this week is for an agreement to be reached on how the 2015 budget performed and on the forecast for the 2016 budget, as well as those of next couple of years.

Sources say that the Finance Ministry is adamant that 2015 closed with a primary budget surplus of 0.2 percent of gross domestic product, against a target for a 0.25 percent primary deficit, despite the fact that not all of the measures agreed were realized.

In that context, the ministry will try to find common ground with the creditors on a new baseline scenario that will leave out the measures that were voted without being implemented, turning them into a safety cushion for this year. They are estimated to add up to 900 million euros and the government wants to use them for covering any fiscal gap (or part thereof) that the creditors expect for this year.

Ministry officials say that the European Commission is not against that option in principle. However, the IMF is resolute, saying that 2015 brought a 0.6 percent primary deficit and that there will be a fiscal gap of at least 0.5 percent of GDP this year, which will entail an extra 900 million euros in new measures.

The creditors all dispute whether the government will be able to implement the measures that have remained on paper, especially the defense cuts estimated at 350 million euros.

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