Speculation regarding the ‘day after the Memorandum’ tends to ignore the fact that that the country must still overcome the the final assessment of the bailout program by the Troika.
In the recent Eurogroup meeting, the eurozone’s finance ministers made clear that the negotiations over Greece’s post bailout future depend upon a positive report by the troika. And with time rapidly running out (the decisive Eurogroup meeting is due on the 8th of December), Greece has yet to implement a number of reforms and austerity measures demanded by its lenders under the current Memorandum.
Last Friday the troika sent the Greek Finance Minister a list of the 19 outstanding conditions that must be met by the country in order for the troika’s evaluation to be successful, according to reporting by the Kathimerini newspaper.
These include covering a fiscal gap for 2015 that the troika calculates at 2.6 billion euros, changing to the social security system, lifting key restrictions on the auctions of foreclosed homes, moving ahead with the privatization program, restricting public sector benefits and more.
Many of these issues are cans that have been repeatedly kicked down the road by a government increasingly struggling for its political survival. However with the lenders apparently unflinching in their requests, push is very much coming to shove. As a result one expects that many of these issues to dominate the headlines in the coming weeks.
More specifically the 19 demands are:
1. To cover the fiscal gap which the troika puts at 2.6 billion euros for 2015. This gap is created in part because the Greek side has committed to achieving a primary surplus worth 3% of GDP.
2. Changes to the measure to restructure outstanding business and citizen debts to the tax office and social security funds. The troika is unsatisfied with the government’s recent draft legislation that provides for such debts to be paid off in up to 100 installments. The troika considers it too generous and that there are insufficient incentives for the payment of debts.
3. A commitment by the government that it will not legislate for horizontal write-offs of unserviced household debts (consumer loans and mortgages). It also wants to see restrictions preventing the auction of foreclosed homes lifted by the end of the year.
4. The troika considers that reform of the revenue service is insufficient and is expected to demand that the General Secretariat of Public Revenue be granted greater independence from political influence.
5. Regarding social security reform, the troika is demanding that the Greek side implement parametric changes (i.e. changes in age limits, required years of paying in etc.). The Greek government must also implement key reforms laid out in the Memorandum such as further restriction of early retirement and a rationalization of the minimum pension system.
6. A broadening of the range of services and products taxed under the higher VAT level of 23% and an elimination of exceptions and discounts (which generally affect islands and remote areas).
7. Further implementation of market reforms on the basis of the OECD ‘toolbox’.
8. Labour law reform allowing for mass layoffs in the private sector according to Memorandum commitments. Furthermore the government must make improved proposals with regards to lockouts in line with EU best practices.
9. Changes to bankruptcy law in order to deal with problems identified by previous troika assessments and to make it consistent with extrajudicial processes.
10. A presentation of the new unified salary scale in the public sector.
11. A restriction of supplementary benefits in the public sector (eg travel costs, mobile phone costs, away from base allowances). Differences in salaries among between civil service branches must also be reduced.
12. The implementation of systems to evaluate spending by ministries as well as other public sector bodies (such as local government offices).
13. Proposals to restructure state companies and utilities.
14. An improvement in ‘fiscal rules which will provide greater financial independence and flexibility to public bodies. This must be voted on by parliament in 2015.
15. The troika notes that the 2014 target for privatizations has been missed (it stood at 1.5 billion euros whereas 600-700 million euros has been raised to date by privatizations). The troika also notes that targets for outstanding debts owed by the state to the private sector have also been missed, as have targets for public sector layoffs, tax return and pension applications that are still pending.
16. With regards to privatizations the government must focus on the sale of shares in OTE (the state run telecommunications company), as well as the privatization of the ports of Piraeus and Thessaloniki. Progress has been noted in the privatization of OSE (the train company) and the sale of regional airports.
17. Regarding statistics the troika is demanding the extension of the tenure of the independent advisory committee of the Hellenic Statistical Authority (ELSTAT).
18. The adoption of simplified licensing procedures by the beginning of December.
19. Tabling in parliament of legislation liberalizing the natural gas market.
The government spokesperson, Sofia Voultepsi sought to play down the breadth of the demands being demanded by the troika saying, “Between the troika and the Greek government it is usual for a series of documents to be exchanged which, under no circumstance, predetermine the outcome of the negotiation.”
It is clear that the all of the 19 demands made by the troika are unlikely to be met in the next three weeks by the government. As such it remains to be seen just what a ‘successful’ troika evaluation will look like, provided one is forthcoming.
It is also clear that the government is unlikely to be let off the hook regarding the troika’s demands. In short any conditions left unmet will more than likely become some of the strings attached to any new agreement to support Greece, such as the establishment of a 'precautionary credit line' extended through the European Stability Mechanism or IMF.
As such while the Memorandum may be coming to an end, the days of austerity and structural reforms imposed by Greece’s creditors are here to stay for a good while longer.