The MEGA cutter

Posted by Kyra Adam 11/01/2017 0 Comment(s) Economia Blog,

The SYRIZA government desperately needs a new success story, anything that can be used as “victory” and “fulfillment” of her goals face to face with the angry creditors and the pauperised, frustrated, Greek people.

The opportunity is right here, right now: the inclusion of Greek bonds into the ECB’s QE programme up to March or early April 2017and the country’s return to market. Yet ECB has three preconditions in order to conclude the Greek debt is sustainable and thus ripe for QE: The short term measures (already agreed), the conclusion of the second review, hand by hand with the medium- term measures.

Time is now short. The negotiations for the conclusion of the second review have stuck since December 2016 and it is more than obvious that the Greek government has to make a move if she really wants to reach a compromise with the creditors for the shake of the QE programme.

The issue is a very difficult one, because Athens has to meet the preconditions set by the European creditors for the conclusion of the second review of the Greek programme, as well as the IMF demands for the sustainability of the Greek debt in order to participate in the third bailout programme, which in itself is an alleged precondition for Germany to allow ESM lending to Athens.

The Greek government is now working on a rather “tricky” scenario.

Having accepted since May 2016 “the cutter”, ( whereby an automatic fiscal mechanism in order to take corrective action if the fiscal target fails),Athens is now considering the inclusion of pensions and the tax-free threshold to this mechanism, up to 2018, when the bailout programme ends...and (may be)a little bit more.

Nevertheless, Greek government’s sources insist -this is a new “red line”- that the potential “MEGA-cutter” will never take the form of a legislation of measures in advance, as the IMF desires and insists.

IT seems rather premature to conclude the result of this Greek scenario, taking into account that Thursday’s Euro Working Group is expected to discuss only the timetable of the next meetings in order to defrost the negotiation procedures. In this context it is rather unusual to except the conclusion of the negotiations within January. The Greek Minister Euclid Tsakalotos today in Paris is meeting his French counterpart Michel Sapin and tomorrow, in Brussels, European Commissioner for Economic Affairs Pierre Moscovici. The real question is if this new Greek scenario is going to be discussed during the first meeting of IMF, this afternoon.

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