Greece’s next bite of bailout money may turn into a movable feast if Prime Minister Alexis Tsipras can’t convince euro-area authorities he’s making good on his promises.
“Everyone got used to the fact the reviews take longer,” Lithuanian Finance Minister Rimantas Sadzius said in an interview on Friday. “Everyone’s prepared to demand that agreements are implemented at 100 percent.”
European governments won’t rush through additional disbursements until Tsipras delivers on pledges to fix Greece’s pension system, update its labor markets and close fiscal gaps. A slow approach to resolving the nation’s financial needs has already pushed borrowing costs to levels not seen since last August and runs the risk of renewing last year’s conflict that nearly ended Greece’s membership in the euro area.
Greece may get 4 billion euros ($4 billion) or more once the nation’s creditors complete a review of the most recent bailout, according to a euro-area official who asked not to be named because talks are ongoing. If Greece fails to unlock more funding it may face a cash crunch by the middle of the year.
The first evaluation of Greece’s 86-billion-euro aid program that was inked in August, which was supposed to conclude in February or early March, is now sitting in limbo. In an interview published Monday, ESM chief Klaus Regling told Le Figaro he thought the assessment could be “concluded before Easter” — without specifying whether he meant this year’s March 27 celebration in Rome or the Greek Orthodox Church’s May 1 observance.
Greek government notes are the worst performing of all sovereign securities tracked by Bloomberg’s World Bond Indexes this year, amid doubts over the government’s ability to push through painful economic overhauls demanded by creditors. Greek stocks have dropped more than 15 percent, amid a succession of protests by farmers, doctors, lawyers, pharmacists and other independent professionals against the government’s pension reform proposals.
Thousands of tractors have been blocking Greece’s motorways, bringing traffic to a halt, while the government said Monday that it will amend some of its proposed hikes to mandatory pension contributions, in an effort to stem social backlash. Officials representing creditor institutions have been assessing whether the debt-ridden country will deliver additional pension savings equal to 1 percent of its gross domestic product this year and achieve a primary budget surplus equal to 3.5 percent of its GDP by 2018.
For more money to flow, Greece needs to win support from both the European Commission and the International Monetary Fund before it can approach the euro area. The Brussels-based commission wants to keep chipping away at the incremental “milestones” the euro area has used to maintain day-to-day momentum, while the IMF has pressed for broader goals that will contribute to Greece earning a new bailout program from the Washington-based fund.
Dutch Finance Minister Jeroen Dijsselbloem said the IMF will come on board the new agreement, if “things are as they want it.” In an interview last week in Davos, Switzerland, he said creditors will look at how to manage “spikes” in Greece’s repayment schedule as long as the nation delivers on its pension and other reform promises.
European Commission spokeswoman Annika Breidthardt said Friday that technical talks related to the review are already underway and that mission chiefs will return to Athens shortly.
Recent delays don’t seem to be affecting European plans, said Estonian finance minister Sven Sester, giving euro-area finance ministers all the more reason to ensure the review is done right.
“The pension reform is one of the most important steps in the near term,” Sester said in an interview last week. “Its impact will be long term and it will will certainly cause a lot of discussions in Greece. We can expect that.”