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Continued international supervision of Greek economy may continue

It now seems clear that Greece is not going to escape from international monitoring of its economy for the foreseeable future (at least not without exiting the Eurozone).

That much is clear despite whatever Antonis Samaras’s government may have tried to imply from time to time with talk about a ‘bailout exit’ and the ‘post Memorandum era’.

Should there be any who still doubt that Greece will be kept on a tight leash, one only needs to refer to a recent TV interview given by the Greek Finance Minister Gikas Hardouvelis.

Here it should be noted that Mr Hardouvelis is not an elected politician. He is a technocrat, who has been appointed to his position by the coalition government. As such he is perhaps less concerned with political spin than Mr Samaras or Mr Venizelos.

In his interview Mr Hardouvelis did not shy away from outlining the truth: that according to the bailout agreements that have been already signed by Greece, the country will only escape international monitoring of its finances when it has paid off 75% of its (astronomical) debt.

Still the government is still pushing for the relative fig leaf of replacing the bailout agreement with a precautionary credit line thus heralding a ‘post memorandum era’.

The European arm of the bailout program is due to end by the end of this year, while the IMF is due to continue to provide low interest loans to Greece (with conditions attached) through 2015. The government is pushing to end the IMF loans early when the EFSF releases its final loan tranche, and portray this as a Memorandum exit. The country will instead cover its funding needs by borrowing from sovereign debt markets with international lenders extending a precautionary credit line (with conditions attached) for the event that Greece finds itself once again shut out of the markets.

In this way the Prime Minister is hoping to portray continued financial assistance of the country from international lenders as a ‘bailout exit’. Again it is stressed that financial oversight of Greece in one form or another will always remain a given.

An EFSF bailout extension?

However even this plan appears to be in doubt according to a document outlining the agenda for the upcoming Eurogroup meeting. A key paragraph states that the European Finance Ministers will discuss the possibility of extending the financial support programme from the EFSF (the European Financial Stability Fund) after December 2014.

According to the document, the head of Eurogroup Jeroen Dijsselbloem writes that ,”A possible continuation of the ongoing programme of the EFSF will also depend on Greece’s access to financial markets.” The particular paragraph states, according to reporting by capital.gr, that the progress of Greece’s second bailout programme will be discussed although no decisions will be taken.

It should also be noted that Greece is due to receive its final loan tranche from the ESFS in December (together with an additional 3.5 billion euros from the IMF).

However the disbursal of these funds depends on a successful evaluation of Greece’s implementation of the reform programme by representatives of the country’s ‘troika’ of lenders.

And that is still up in the air, given that it remains unclear when the troika will return to Athens. This is in part because Greece has yet to implement a number of tricky and key reforms demanded by its lenders.

Meanwhile the timeframe is rapidly dwindling as the Eurogroup is due to take key decisions regarding the future of Greece in a little over a month on December 8th. 

The Finance Ministry has issued a statement maintaining that the Eurogroup head, Jeroen Dijsselbloem, was not referring to a potential extension of the current bailout programme but the phase after the current programme.

According to the statement the Greek Finance Minister communicated with Mr Dijsselbloem about the issue, with the Eurogroup chief making clear that he was not discussing an extension of the Memorandum program.

“Whoever, therefore, cultivated scenarios on erroneous bases cause harm to the country,” the statement concludes in a stern tone.