A long road to fiscal independence

The fiscal measures of the third bailout memorandum evaluation end with the tabling in parliament of the harsh 2018 state budget, which provides for a primary surplus of 3.5 percent of GDP until 2022 and for redistribution and cuts in social welfare benefits.

Benefits will be cut back for families with three or more children, handicapped citizens, and poor pensioners currently receiving an EKAS stipend.

Parliament has already passed pension cuts of 1.8 billion euros, or one percent of GDP, for 2019, and new cuts in the tax-free limit as of 2020.

Banking reforms crucial

A key prerequisite for closing the current fiscal adjustment programme evaluation and the next and last one, before summer, is the reform of the banking sector and the resolution of the non-performing loan problem.

Additionally, there must be reforms in the governance of banks, with structural changes wherever there are significant delays.

The first mandatory reform is a change in the framework of strikes and the trade union law.

The second reform is the sale of the Public Power Corporation’s (PPC) lignite units, which has been left over from the second bailout memorandum.

All of the above constitute a roadmap for the conclusion of the third memorandum next summer.

Growth projections

The European Commission projects a 2.5 percent point growth rate in 2018 and a drop in the unemployment rate to 20.4 percent.

But it does not consider these figures sufficient to ensure sustainable growth in Greece.

Hence, the “full implementation” of the current programme with European Stability Mechanism (ESM) funding, and the completion of privatisations and structural changes, are the pre-condition for Greece’s final exit from the bailout memorandums.

Privatisation a priority

The EU wants the government before summer to ply ahead with large investments that are underway, complete its privatisation plan, and exploit public sector assets.

The EU also wants the government to bolster and increase staffing in the independent public revenues authority, and to proceed with civil service reforms.

The Commission expects the 5:1 ration of civil service retirees to hirees to continue in the coming years.

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