In a letter to the members of the Eurogroup, chief Jeroen Dijsselbloem summarized what was agreed upon at the meeting in Malta on April 7th 2017. In his letter Dijsselbloem reveals also what the Greek government agreed on the implementation of the additional austerity measures scheduled to be implemented in 2019 and 2020, after the current Greek program concludes in August 2018.
The key element is that that the Eurogroup and the Greek government agreed that lowering the tax-free basis can be implemented a year earlier if the targets are not met.
What Dijsselbloem describes as reforms is a package of 3.6 billion euro austerity measures.
1.6 billion euros – 1% of GDP- in pension cuts to be implementing in 2019
1.6 billion euros -another 1% of GDP – in additional revenues by lowering the tax-free basis to some 5.600 euros annual income. This is supposed to be implemented in 2020.
The agreement in Malta set also the package of the social measures planned by the government at risk.
But this is how deal are reached….
The letter is published by Greek media amid the debate on the participation of the International Monetary Fund in the Greek program and the Fund projections that Greece cannot reach the target set by its European Lenders.
Government spokesman Dimitris Tzanakopoulos dismissed as “baseless” the scenarios claiming that all the additional measures will be implemented in 2019. “The government is working towards a thorough agreement,” Tzanakopoulos said on Thursday, as the Greek financial team travels to USA for the IMF-World Bank spring meetings, the creditors’ representatives have not returned to Athens and negotiations to conclude the second review keep stalling.
While flying to Washington, Finance Minister Euclid Tsakalotos and Alternate Finance Minister George Chouliarakis have a roadmap in their luggage and hope in their hearts.
The ministers hope that a compromise between the Europeans and the Fund on the debt issue will be reached on the sidelines of the meetings.
Greece is expected to focus on the 2016 primary surplus which is seen over 3.5 pct of GDP.
During the contacts in Washington, the green light is expected to be given for the return of the institutions in Athens next Monday-Tuesday so that the staff level agreement is concluded and the overall package (measures, offset measures, primary surpluses, medium-term measures on debt) gets well on track.
According to the government roadmap, the next steps are:
1. Conclusion of the staff level agreement (SLA) that includes reforms as well as negative and positive measures for 2019-2010.
2. Determination of the medium-term measures on the debt that will be implemented after the end of the programme (September 2018). The measures on the debt and the IMF debt sustainability analysis are a necessary precondition for the Fund’s participation in the programme.
3. After the implementation of the medium-term measures on the debt, the measures and the offset measures provided in the Malta agreement of April 1 will also be implemented.
The government’s aim is to have everything concluded by the Eurogroup on May 22 (including the medium-term measures on the debt) so that the road opens for the participation in the ECB quantitative easing programme.
PS So the agreement is measures 2% of GDP in 2019? Sure. The problem is to jump over Schaeuble’s trap with 3.5% primary surplus for the next ten years.