The representatives of the international institutions will discuss with the Greek government on Wednesday the issues related to the Eurogroup planned for May 9. Greece will be represented at this Euro Working Group teleconference meeting by alternate minister of Finance George Chouliarakis.
 
Euclid Tsakalotos, Greek minister of Finance has already committed that the Greek government will present on Monday a specific list of measures, and their exact expected economic results, which will add up to 3.6 billion euros for the automatic mechanism in order to readjust budget shortfalls through mainly expenditure cuts and more taxes. This way, more austerity measures will be implemented if needed, without being voted by the Greek parliament.
 
Apart from this extra package of measures which is now being negotiated, there is another package of 5.4 billion euros which has already been agreed on by Greece’s international creditors. The only pending issue that remains to be clarified is the amount of tax-free personal allowance for salaries and pensions.
 
The European Commission has already offered a glimpse of the austerity measures that Greece will have to implement, as part of the so-called reforms, to receive the next bailout tranche:

  • 1% of the GDP or 1.8 billion euros will come from cost savings from the pension system.
  • 1% of the GDP or 1.8 billion euros will come from income taxes, and more specifically from the new tax scales for salaries, pensions, self-employed professionals, rents and the solidarity contribution tax.
  • 0.25% of the GDP or 450 million euros will come from the increase of VAT and possibly the demolition of the lower 6% VAT for commodities (it will be probably maintained only for pharmaceutical products).
  • 0.75% of the GDP or 1.35 billion euros will come from readjustments at the unified pay system for all public servants, which translates in more salaries cuts, as well as some increase in taxes related to tobacco, alcohol and fuels.

Despite all these measures, there is no expectation of a final agreement at the extraordinary Eurogroup that will take place on Monday, May 9, according to a source that Reuters cites. A few more weeks will be needed, Reuters’ source estimated and therefore the Eurogroup of May 24 becomes the new point of interest.
 
The International Monetary Fund (IMF) and some other European member states, which have been pushing for more austerity, demand that Greece commits in another preemptive 3.6 billion euros measures, if the budget target for 3.5% surplus by 2018 is not achieved. Athens is willing to vote for an automatic mechanism which will adjust expenditure and taxes in case of budget shortfalls but argues that it is against the Greek law to legislate in advance, under the scheme the IMF proposes. In either case, the Greek parliament will be overridden.
 
In that context, the President of the European Council Donald Tusk yesterday, during a joint conference with Japanese Prime Minister Shinzo Abe and European Commission President JeanClaude Juncker, urged for an agreement on the Greek issue “very soon”.

Negotiations have been in a stand-still for some time, which increases uncertainty also ahead of the G7 summit; as it was revealed earlier this month by a Wikileaks transcript of the conversation between highly ranked IMF officials, the Fund could use stalling tactics to put extra pressure on the Greek government and European leaders.

“I hope that by the end of May when we meet at the G7 summit the implementation of Greece’s program is positively assessed. I want to encourage all the ministers and institutions to redouble their efforts in finalizing the review” Donald Tusk commented.
 
“We need to make sure that Europe contributes to stability rather than global instability. We should do all in our power to dispel uncertainties. There is no doubt that a successful completion of the ongoing review of Greece’s program would strengthen confidence” Tusk added.
 
Meanwhile, German Finance Minister Wolfgang Schaeuble said on Tuesday that he does not expect a “big crisis” to erupt this year in Greece, which would be history repeating since last summer. “We will have no big Greece crisis this year” Schaeuble said, adding that the country is on its way to making visible progress.
 
Actually, according to governmental sources, there has been some satisfaction on the Greek side regarding the Eurostat estimations that were announced on Tuesday and which agree with the governments’ assessment that the Greek economy will recover faster than expected and will rebound in the second half of 2016. Also, the Greek government expects Eurostat’s figures to be a strong negotiating point for the completion of the first review of the third bailout program, which will unlock the next tranche in time so that Greece will be able to pay for its maturing debt in July.
 
At the same time, Euclid Tsakalotos, Greek minister of Finance, appears to keep pushing on the agenda for the debt relief which Athens has been aiming at since summer 2015 when it came to an agreement with its creditors. In order for the debt relief discussion to even start, the first review of the third Greek bailout program has to be completed.
 
Prime Minister of France, Francois Hollande said during a cabinet meeting earlier today that “France wishes for an agreement on Greece on Monday” that is at the extraordinary Eurogroup of May 9. The French government’s message, which wants to avoid any further turbulences, sums up to stability and return to growth for the Eurozone.