Calls for ‘political solution’ again surface in Athens, as talks deadlock over labor sector reform

23 November 2016
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The Tsipras government on Tuesday referred to a “political solution” in order to conclude the increasingly critical second review of the Greek program (third bailout), given that differences between the country’s institutional creditors and Athens over labor sector reforms, among others, have not been ironed out.

Labor sector liberalization, a key demand by one of the four creditors comprising the “Quartet”, namely, the IMF, has long been on the agenda of negotiations and is not an “out-of-the-blue” hurdle. Specifying reforms and implementing them was one of the chapters left over from the first review of the Greek program in May 2016.

The situation is vaguely reminiscent of deliberations in the spring of 2015, when Greek Prime Minister Alexis Tsipras, while attending a EU summit in Riga, then pressed for a “political solution” at the time.

On Tuesday, the government spokesman stated that the government “has the political volition to conclude the review … such volition is also required by all sides,” Dimitris Tzanakopoulos added.

The leftist Greek government nevertheless continues to view the Dec. 5 Eurogroup meeting as the decisive date for concluding the second review, while allowing for a few weeks more in order to discuss measures for debt relief and a revision of primary budget surplus targets after 2018. If this scenario plays out, then debate would reach the Greek Parliament’s floor in the first half of January 2016.

Once again, however, much of Athens’ planning and “best-case” scenarios depend on Germany’s stance, as the latter is the biggest contributor amongst European creditors and has a more prominent influence on ECB policy and even vis-a-vis other Eurozone countries.

As deadlines approach, either Berlin will acquiesce to short-term debt relief for Greece in the coming weeks and begin negotiations over lower fiscal targets after 2018, or the “Schaeuble position”, which bumps back whatever measures for after 2018, will be maintained.

A preview of how the Greek government may proceed will come with an address on Wednesday by Prime Minister Alexis Tsipras to ruling SYRIZA’s parliament group.

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