EC skeptical on Greek bid to lower fiscal goals, wants supervision

A few days before troika inspectors return to Athens for their fifth review of Greece’s economic reform program, sources in Brussels have expressed skepticism about a Greek bid to lower fiscal targets while indicating that certain concessions could be granted but that the country must remain under supervision.

The chief aim of the talks is to determine the progress that the government has achieved with reforms. Another key topic will be the type of supervision that should be in place from next year, after the European part of Greece’s loan program ends, and whether or not more funding will be necessary. Athens has insisted it will not need a third loan program but sources in Brussels note this can only be guaranteed if Greece secures the trust of the markets and that in order to do this it must press forward with reforms.

In comments on Friday, Deputy Prime Minister Evangelos Venizelos emphasized that he favored an early withdrawal of the International Monetary Fund, which is officially tied to Greece until spring of 2016, but said the government had not made an official request to the IMF to leave as this would require the backing of European partners.

Pending structural reforms will also be discussed in the talks with the troika, which are likely to be as grueling as ever as a total of 1,000 reforms – big and small – are on the to-do list. Sources said the troika is prepared to be lenient on some issues but is unlikely to agree to so-called “structural benchmarks” such as pension reform being struck off the list.

Greece’s finances will be examined in detail, with sources indicating that the auditors are prepared to consider allowing some tax breaks to be included in the draft budget for 2015 if lost revenue is offset with equivalent measures.

As usual, Greece and the troika disagree on the size of next year’s fiscal gap, with the latter putting it at around 2 billion euros and the former half that sum.

Talks on debt relief are not expected until early November, when specific budget details and the results of stress tests on banks will be available.

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