Greek officials on Monday started talks on the terms of the third bailout that was agreed on July 13 between Greece and its creditors. The negotiations are currently taking place on technical level between Greek authorities and Troika representatives following a delay from the previous week over finding a suitable hotel location away from protesters’ reach in the centre of Athens. Troika chiefs are not expected to arrive in Athens until Wednesday and it is hoped that the negotiations will conclude on Friday.
European Economic and Monetary Affairs Commissioner Pierre Moscovici was quoted on Wednesday as saying that the talks were taking place in “good conditions”. This follows earlier reports that Athens had demanded restrictions on Troika officials’ movements.
This week’s negotiations are set to focus on pension reforms such as cutting early retirement and raising the retirement age, as well as on labor market reforms, fiscal reforms and ending restrictions in the product market. The creditors are also hoping that the Syriza government will back down on its election pledges to strengthen collective bargaining rules and undo laws that allow mass dismissals. However, the creditors appear to be willing to agree to lower primary surplus targets, mainly due to the sudden deterioration in the Greek economy over the past few months.
EU officials have not set a firm deadline on when to conclude the talks but it is hoped that a deal can be reached by August 11, which would give national parliaments across the Eurozone enough time to approve the deal before the next ECB repayment. Greece is due to repay the ECB the amount of €3.2 billion by August 20. If a deal is reached before this, Greece would be able to use its bailout funds for the payment, otherwise, it is likely that the Greek government would have to rely on another bridge financing of €6 billion from the EU-wide rescue fund to make the payment.
Despite positive assessment so far on Greece’s progress, following the Greek parliament’s swift approvals of the reforms set as a pre-condition for the talks, several hurdles remain. One of which is the IMF’s involvement in the new bailout package. The head of the Eurozone’s bailout fund recently said that the fund will only provide €50 billion out of the total €86 billion, implying that some contribution from the IMF would be required. However, the IMF has made it clear that it will not distribute any further funds to Greece without an agreement by Eurozone governments on some form of debt relief.
EU officials have said though that debt reprofiling can only be considered after the first review of the bailout is completed successfully in November, meaning any agreement in August will have to be done without the IMF. The ECB has also been vocal on the need for debt restructuring in order to aid Greece’s economic recovery.
There are doubts too on how much can be raised from privatization as the €50 billion target set by the creditors is seen as unrealistic. Fresh elections in Greece could also derail the program. The Greek prime minister, Alexis Tsipras, was quoted on Wednesday as saying that he could be forced to go to elections if he loses his majority in parliament. This is a strong possibility after losing the support of one in four of his lawmakers in the bailout votes.
With the Athens Stock Exchange expected to reopen on Thursday after almost five weeks, life in Greece is returning to normal despite capital controls and ongoing concerns of a Grexit. The coming months will be crucial in determining whether Greece’s future is best served in or outside of the Eurozone.