A week ahead of a decisive meeting to end eight years of the Greek bailout, Greek prime minister Alexis Tsipras once again convinced his radical left-nationalist coalition to approve a package of measures required by the creditor institutions.
In cooperation with the European Commission, European Central Bank, European Stability Mechanism (ESM) and International Monetary Fund (IMF), elements of an agreement between Greece and its creditors are slowly coming into place.
With 154 votes against 144, the Greek parliament adopted the 88 so-call ‘prior actions’ that constitute the fourth and last review of the bailout program agreed in 2015.
In addition to closing the review, Eurozone finance ministers and the banks will try to agree on an overall package that will include a set of debt relief measures and a new mechanism to monitor Greece’s economy.
But the main issue on the Eurogroup’s table will be a long standing discussion on debt relief, which has pitted the EU against the IMF since the start of the current bailout in 2015.
The loan is expected to be at least €11-12 billion, with an additional amount to create a cash buffer, up to €20 billion, that will allow Greece to cover its financial needs until at least the end of 2019.
They could also include returning to Greece profits made by EU states on previous loans to Greece. The money, around €4 billion a year until 2022, could be paid to Greece in several tranches, under the condition that Greece continues to implement the capitalist reforms, and would be used to repay its debt.
Another point of the discussion is the so-called growth adjustment mechanism, also called the French mechanism, because it was proposed by French finance minister Bruno Le Maire last year. Under the scheme, Greece’s repayments would be bigger when growth is stronger, and smaller when growth is weaker.
In the future, the IMF would monitor Greece’s economy through its standard procedures. For its part, the EU would trigger the so-called ‘enhanced surveillance’, a mechanism introduced in 2013 that has not been used yet.
Under enhanced surveillance, which would start on the day the bailout ends, 20 August, the European Commission would send regular missions to Athens and would report on economic policies.
“It’s very important that Greece can stand on its own feet,” said Hans Vijlbrief, the head of the Eurogroup working group, the body that prepares the meeting. “If it’s not credible, we won’t come out. This is the first condition.”
EU Observer / AA Flash Point News 2018.