Prime Minister Alexis Tsipras faces a fresh test next week as a new set of prior actions must be voted through Parliament by Tuesday for the country’s creditors to unlock another 1 billion euros in loans before the Christmas holidays.
The bill is expected to pass into law, partly because some of the thorniest reforms have been put off until early next year. But with just a three-seat majority in Parliament, even one or two defections would be a blow for Tsipras.
The bill includes reforms relating to a new privatization fund, the privatization of Greece’s electricity grid operator ADMIE, and rules governing the sale of nonperforming loans (NPLs) held by banks. The latter was the most prickly issue in talks between government officials and representatives of the country’s creditors.
The compromise reached will allow the bad loans of large companies and the unpaid mortgages for properties that are not main residences to be sold to foreign funds. Meanwhile, the NPLs of small and medium-sized enterprises, as well as mortgages for primary homes, are to be excluded from the portfolios banks can sell to distressed debt funds, at least until mid-February.
The Euro Working Group is to confer on Wednesday and decide whether to propose the disbursement of 1 billion euros.
The major hurdle is ahead, however. The government must draft more tough reforms, notably an overhaul of Greece’s dysfunctional pension system in January. Passing the pension bill will allow creditors to conduct a first review of Greece’s third bailout which, if successful, can pave the way for talks on debt relief. Decisions relating to Greece’s huge debt burden are expected to determine whether the International Monetary Fund will participate in the third bailout. Greece’s eurozone partners want the IMF on board but Athens has expressed concerns about the Fund’s tough stance on pensions and other issues.
According to sources, the IMF has doubts that Greece will achieve a primary surplus of 3.5 percent of gross domestic product in 2018, in line with original forecasts, predicting instead a fiscal gap of 6 billion euros due as reforms fail to hit the mark.