Greek bailout talks inch forward

Creditors are now pushing for a political deal as soon as possible to ensure Athens can meet its debt repayment.

VALLETTA, Malta — The Greek government took a step closer to securing its next disbursement of bailout cash after it reached an interim deal on the latest round of reform commitments for its €86 billion bailout program.

A “policy” agreement on “the size, timing and sequencing of the reforms” was announced Friday following the Eurogroup meeting of eurozone finance ministers in Malta. The deal allows officials from the EU institutions and the International Monetary Fund to travel back to Athens “as soon as possible” to iron out the technical details and conclude the so-called “second review” of the rescue package.

Greece and its creditors had been at loggerheads for months to move the bailout package forward, and all parties welcomed the announcement which — for now — allays fears of a repeat of a Greek-triggered eurozone-wide crisis in the summer of 2015.

Time is running out for the Greeks, who face a €7 billion bill in maturing government debt and interest payments in July. Without the next disbursement of bailout cash, Greece may not have sufficient funds to pay its dues.

“The Greek economy in the first half of last year was picking up, and that momentum is slipping away from us,” Eurogroup President Jeroen Dijsselbloem said. “So we really need to work fast and have [the second review] done well in time for the next payment that Greece needs to make the disbursements that are needed for that.”

But many more steps remain before all stakeholders can announce a political deal on the review, which is a vital precursor for IMF participation that countries like Germany and the Netherlands are insisting on.

Nonetheless, the latest breakthrough has officials eyeing a formal agreement by May 22, when eurozone finance ministers gather for their next Eurogroup meeting in Brussels.

As part of the agreed-upon policy deal, the Greek government will soon write into law intended cuts to its pension and tax policies to secure its budget surplus target of 3.5 percent of GDP and maintain it for the “medium term,” once the bailout program ends in mid-2018. Pension cuts are expected to take place in 2019, while changes to Greece’s tax policies should come into effect in 2020.

In return, the Hellenic government will be able to prepare growth-spurring initiatives, which can be introduced with any extra cash that Greece collects in the event that it overshoots the 3.5 percent budget surplus target.

Greek Finance Minister Euclid Tsakalotos hailed the “substantial agreement” even though it involved “more delays than I’d like to have seen,” adding that “all parties must take some share of the responsibility for that delay.”

To complete the final agreement, Greece’s creditors will have to discuss with the IMF what is meant by “medium-term” in relation to the budget surplus target.

Once that’s agreed, an economic forecast for Greece must be made and potential debt-reducing measures crafted before the IMF can conduct its debt-sustainability analysis.

Then, IMF staff will present their conclusions to its board in Washington, which has the ultimate say on whether the Fund should participate in the current Greek bailout package, or walk away.

Only then can Greece’s creditors agree on a disbursement figure that will allow Athens to meet its debt payment in July.

“We need a deal very quickly,” Tsakalotos said. “There are very few actors, if any at all, that want another Greek crisis.”