Daily Management Review

Date For Fresh Payments And Discussion On Debt Is Uncertain Even As Greece Agrees To New Reforms


Date For Fresh Payments And Discussion On Debt Is Uncertain Even As Greece Agrees To New Reforms
After Greece exits its third bailout program, new measures worth of 2 percent of gross domestic product by the end of the decade has been agreed to be put in place by the country’s government.
However, doubts about Greece's ability to repay creditors in July is raised as there is no scheduled date for new payments to Athens. Furthermore, the process of discussions on debt restructuring are set to be complex and long and they are yet to begin.
After the Greek government agreed to legislate reforms affecting the country's pension system and widen the country's tax base, there’s been “significant progress” in talks with the later, Eurogroup President Jeroen Dijsselbloem said.
An EU official said that technical teams will be able to conclude the second bailout review after the Greek government implements the pledged reforms following the Eurogroup agreement.
Greece will receive fresh disbursements from the 86 billion euro ($91.40 billion) bailout program once that review is finalized.
"We don't know dates for disbursements," the official said. It all depends on how quickly Greece legislates the new reform package.
Without new money coming in, Greece will struggle to repay 8 billion euros ($8.51 billion) it owes governments and private investors due next July, analysts have said.
"My guess is that the Greek government got a stern warning from the ECB(European Central Bank)/Bank of Greece that a further impasse would have meant a severe hit to the economy via capital outflows," Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics, told CNBC via email about Friday's agreement.
"We have to be skeptical of course that a reform pledge for 2019 and 2020 will actually be carried out, but it plugs a hole for now," he added.
But assuming that Athens follows through with the pledged commitments, the big hurdle in Greek bailout talks comes after the conclusion of the review.
"We will start discussing the Greek debt, and that's going to be a very complicated discussion," the official said.
The country's debt need to be more manageable, before it joins the Greek bailout, the International Monetary Fund has said. At the same time, to give credibility to the program, European creditors want the IMF involved in the Greek process.
And since the program began, Greece's euro creditors, Greece and the IMF have been plagued by this issue. This is because, before the program concludes in 2018, there's been strong opposition from European countries to grant significant debt relief.
In order to ensure that the reforms agreed so far will reduce Greece's debt, the IMF will conduct a new debt sustainability analysis even though it has already agreed that debt relief can be applied after 2018. The Fund will join the bailout financially if that's the case.
"As for the IMF, I would assume that they are in … otherwise I don't see the Eurogroup agreeing to this. Another way to put it is that they haven't said, as far as I can see at least, that they're out. So I have to assume that they're in," Pantheon's Vistesen said about the IMF's participation.

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