Following two weeks of in situ examination-cum-deliberation over the progress achieved by Greece (N.B.: the country, its economy, not the outgoing or incoming Government), the good old Troika/Institutions under the garb of the enhanced post-Programme surveillance left Athens with some reservations about the undertakings taken in view of their (fourth) Progress Report, but with no major hiccups. A good omen for the new Government.
An omen that should in no way lead to any sort of complacency; after all, the never-ending Greek quest for fiscal space may well bring about renewed concerns in Brussels. (The latest specimen: both the Finance Minister and the PM said – loud and clear – that were targeted revenues to overshoot, then last-year’s solidarity benefit to low-income beneficiaries would be replicated, at year-end). Meanwhile, Christos Staikouras in the hot seat of Finance Minister played a rather shrewd hand with the 2020 Budget presented in draft form: the 2.8% growth rate used may be over-optimistic, but not outrageously so; projections for tax income adequate to stay within targets are also on the sunny side, but the fact that income in tax returns has to be 30% covered by electronic pay allows for some kind of effective fight of tax evasion.
So, while earlier hopes that a cut in Eurogroup-mandated primary surpluses (of a stifling 3.5% of GDP until 2022, then around 2.2% till hell freezes over) should be renegotiated early on, the new kids in the block seem to have realized the “how to play the game” routine of dealing with the Troika/the EuroWorking Group/the Eurogroup. First compliance, then negotiation. Will some margin for fiscal manoeuvre be granted them until – say – next spring? Possible.
All the more so, since the other front of the Greek economy that is fraught with risk – the mountain of NPLs of its systemic banks – looks getting under control; Some optimism is allowed. What does “getting under control” mean? At the very least, that a wider-than-until-now program of securitization/offload of bad loans (for something like 30-40% of outstanding NPLs), with some public guarantees in the way the Italians did it, seems to have got the blessing both of Frankfurt/the SSM and Brussels/DGComp. So, after years and years of talk and planning, plus some hesitant first steps, now something more radical may be afoot. Will the markets price the securities packaged in a way that will allow for success of the operation? Will Greek banks join in (=accept to pay at market rates for the cost of guarantees and packaging)?