The question of why the troika was so easy-going this time round is a recurring one these days. Indeed this was the first time the program’s regular evaluation was not tied to new measures or other dramatic announcements. And this despite the fact that high-ranking troika officials were unable to hide their disappointment at the lack of progress in various crucial sectors. The troika only displayed a hardened stance regarding the banking sector, particularly in its insistence on the annulment of the National-Eurobank merger.
What’s going on? First of all, the important political capital earned by Prime Minister Antonis Samaras and Finance Minister Yannis Stournaras in their rapport with our partners and creditors. The troika’s bosses are fully aware of the political difficulties faced by the government, yet consider that the latter is fulfilling a large part of its pledges. At the same time they don’t feel the country has a ready-to-go, trustworthy government solution in case of early elections and are afraid that a chaotic situation would prolong the incertitude created by Italy.
There is another explanation, however. German Chancellor Angela Merkel does not wish to see the Greek problem re-emerge before the German elections in September. On the contrary, she likes Greece to be presented – as much as possible – as a success story, in order to rebuff attacks from adversaries and euroskeptics. It is no coincidence that behind the scenes in Berlin she is doing everything in her power to stop Greece from receiving negative coverage in local media.
Will the troika maintain this position in the next two pivotal evaluations before the German elections? This depends on progress made in three key areas: privatizations, public sector reforms and the fiscal gap. Things will be tough if there are no major privatizations, if a large number of oath-breaking civil servants are not dismissed and if the fiscal gap nears 2 percent of the GDP. Troika representatives have made it clear that, especially in September, there will be a small margin for “going soft” if no progress is made in these sectors.
At the same time the government knows that there can be no new measures. Samaras also knows that in order to negotiate he must have a couple of aces up his sleeve. Also, following the German elections, the knives will be out between the IMF and Germany regarding the issue of a Greek debt write-off, while no one can predict developments in the rest of Southern Europe.
Until then Samaras has to maintain some kind of balance with his coalition partners and make tangible progress in terms of the country’s pledges. Easter is around the corner, time is flying and those in the know are getting anxious, with good reason.