The approval, at Eurogroup level, of the structural reforms batch that Greece has fulfilled within the scope at the second review of the post-Programme enhanced surveillance is one more step for the country’s reverting to the status of a normal EU/Eurogroup member. The real question – for Greece and for its European creditors/partners – is what exactly this “new normal” can be.
The direct consequence of this approval was the green light for some 1 bn euros of sums to be returned to Greece out of ECB/Central Banks profits from SNPs/ANFAs as well as from the interest rate step-up of part of the bail-out loans to Greece. Also, the agreement in principle for a partial buy-out of the remaining IMF loans to Greece – the Fund’s participation to the Greek bail-out remains at some 9.3 bn euros; it carries interest rates of up to 5% , while the markets have been pricing Greek 10-year paper at 3.5% and the ESM loans cost at less than 1%.
The strings attached to Eurogroup decisions – the exhortations that the system introduced for NPLs/household home relief be applied in a careful way, that the tax base be broadened, that arrears be cleared, that the minimum- wage hikes decided be also applied with circumspection – seemed to impress the markets less than their profits from recent Greek paper issues (10-years in March, 5-years in January). So, there was a Greek-paper rally notwithstanding chilly market conditions in Europe.
There seems to be a new-normal equilibrium for Greece: its creditors are willing to push it faster to the markets (which look welcoming for the time being, while they seemed hesitant at best in end-2018), but a core of reluctance remains for the country to be let free from close IMF supervision (especially on the part of Germany, even under an SPD Minister of Finance who operates supposedly less under the shadow of Wolfgang Schaeuble). The weeks to come will be interesting, indeed.