Tsakalotos heads to Eurogroup to push for relaxed primary surpluses after 2018

10 July 2016
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Even though Greece will not be the topic of discussion at Monday’s Eurogroup, Finance Minister Euclid Tsakalotos heads to Brussels with the primary aim of changing and lowering the budgetary surplus targets Athens has to meet after 2018.

“We must open the discussion of targets,” a senior Finance Ministry official said, referring to Greece’s bid to gradually scale down the 3.5 percent of GDP budgetary surplus, required from it in 2018, to 2.5 percent in the period stretching from 2019 to 2021 and down to 2 percent from 2022 onward.

Greece insists these targets will not compromise the sustainability of the country’s debt and wants the approval of the creditors as soon as possible so as to enshrine the figures in the midterm program for 2017-21.

However, the government will have a tough time making its case as Northern European countries such as Finland, Germany and others have expressed opposition to changes to budgetary targets, arguing that if Greece borrows from the markets after 2018 at a higher rate than the one predicted today, then the country’s debt will need further restructuring.

Eve though both sides – Greece and its creditors – are using financial arguments to make their case, political considerations appear to be the decisive factor in the negotiations.

During the previous review of Greece’s bailout program, the government received a commitment from the creditors to restructure the country’s debt in exchange for pushing through tough measures.

For the new review, which requires equally tough measures in order to be completed, Athens wants the relaxation of budgetary surplus targets after 2018 in exchange.

The sense of urgency to achieve this goal is has grown more acute recently as New Democracy has incorporated the demand for more relaxed budgetary targets in its own rhetoric.

The German government, for its part, does not want to begin any discussion on the budgetary surplus before elections are held there in 2017.

“The surplus is the flip side of the discussion about the debt,” a government source said, adding that German officials are citing Brexit to justify their opposition and that any sign of relaxation toward Greece will only encourage Euroskeptics.

“They are not saying an outright ‘No.’ They are just saying that now is not the time to open the discussion,” the source said.

According to Finance Ministry officials, the midterm program legislation will be ready by July 18, but a source said this will be unlikely if there is no deal on budgetary targets – hinting that negotiations could drag on as Greece has “enough funds” at the moment to meet its obligations.

The tactic of delays may have not served Athens well recently, but analysts suggest the government may believe it has a better chance this time due to Brexit and that the EU cannot afford more uncertainty.

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