Creditors to decide if Greece has done enough for aid
Representatives of the troika of creditors - the European Commission, the European Central Bank and the International Monetary Fund - came to determine whether the Greek authorities have made sufficient progress with their economic overhauls to justify the release of the next instalment of aid for the country.
But before talks between the creditors and Greek officials began on Monday, news reports suggested that the lenders planned to release only part of the next instalment of aid rather than the full €8.1 billion, or $10.6 billion, in order to keep pressure on Athens to deliver on its pledges.
The IMF might have to suspend loan payments to Greece if the authorities are unable to cover a funding shortfall. The organisation's rules dictate that governments must have at least 12 months of financing secured to receive bailout money.
Reports cited a leaked document, purportedly sent by the troika to Greek officials, suggesting that the government might have to make fresh spending cuts if it fails to collect adequate tax revenue and close a funding shortfall of around €1 billion. Neither the government nor troika officials would comment on the news reports.
Prime Minister Antonis Samaras, who saw his government's majority in the 300-seat parliament shrink to just three members after the withdrawal of the junior partner in the coalition, the Democratic Left, has insisted that no more austerity will be imposed.
In a speech to a congress of his conservative New Democracy party on Sunday, he emphasised the need for unity to ensure that the "unbelievable sacrifices" of the Greek people had not been in vain. Two lawmakers who had left the party returned to its ranks on Monday, bringing the government's majority in parliament to 155.
Athens is set to miss a July 31 deadline to move 12,500 civil servants into a "mobility" program for a year, during which they will receive reduced wages before their status is reviewed. New administrative reform minister Kyriakos Mitsotakis, regarded as the most pro-reformist cabinet member, plans to ask for a two-month deadline extension.
Frequently Asked Questions about this Article…
Representatives of the troika—the European Commission, the European Central Bank and the IMF—are in Athens to assess whether Greece has made enough progress on economic reforms to justify releasing the next instalment of bailout aid.
The next instalment under discussion is €8.1 billion (about $10.6 billion). News reports cited in the article suggested the lenders planned to release only part of that instalment rather than the full amount to keep pressure on Athens to meet its commitments.
Yes. The IMF's rules require governments to have at least 12 months of financing secured to receive bailout money, so the IMF might suspend loan payments if Greek authorities cannot cover a funding shortfall and therefore do not meet that condition.
A leaked troika document reported in the article suggested Greece might need to make new spending cuts if it fails to collect adequate tax revenue and cannot close a funding gap of roughly €1 billion.
Mass layoffs at the state broadcaster ERT triggered a political crisis that led the junior coalition partner to quit, dramatically shrinking the government's majority. Prime Minister Antonis Samaras has insisted no more austerity will be imposed, and two lawmakers later returned to the party, bringing the government's majority back to 155.
The mobility program would move 12,500 civil servants into a one-year scheme where they receive reduced wages while their status is reviewed. Completing this administrative reform by a July 31 deadline was a condition for progress; Athens was likely to miss that deadline and the new administrative reform minister, Kyriakos Mitsotakis, planned to ask for a two-month extension.
Kyriakos Mitsotakis is the new administrative reform minister mentioned in the article. He is regarded as the most pro-reformist member of the cabinet and planned to request a two-month extension to meet the deadline for the civil-servant mobility program.
Everyday investors should watch whether the troika releases the full or only part of the next €8.1 billion instalment, any signs the IMF may suspend payments if financing conditions aren’t met, developments on required reforms (like the civil-servant mobility program), and political stability in Athens—because these factors affect Greece's ability to secure aid and stay on its reform timetable.
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