The key importance of the coming Eurogroup for the Greek economy

The coming Thursday, June 16, is characterized as crucial, as on this date the Eurogroup will give the “green light” for the country to leave the regime of enhanced supervision and return to “European normalcy”. The political approval of the exit process from this regime, which is expected to take place on August 21, marks the final end of the memorandum period for Greece.

The exit from supervision does not mean that the monitoring by the European institutions will stop, since it will continue until 2059, ie until the country repays 75% of the loans it received under the memoranda. However, the economy will go through a phase of simple post-program monitoring, similar to what is followed today in Ireland, Spain, Cyprus and Portugal, while an evaluation of its course will be carried out every six months, instead of every quarter that was valid until today.

The approval by the Eurogroup for the exit from the enhanced supervision will activate the disbursement of a installment of 748 million euros. At the same time, however, the “road map” of the prerequisites will be finalized, which will have to be implemented in 2 phases, one by August and one by the end of October.

In the first phase, the commitment for the overdue debts of the State to the individuals is considered basic and there will be a record of the progress in the part of the hospital expenses and the funds that have not been registered in the budget and are related to the increased energy costs. The second phase, which is also linked to an installment of around € 750 million (pending in the first half of 2019 due to the elections, and is expected to be released by the Eurogroup in December), will be the first in a “after programme surveillance “, ie the regime in force within the framework of the European Semester and relating to all the Member States that were in the Memoranda.

A list of 22 points has been drawn up for the autumn assessment, which relate to what is left of the previous commitments. These include, among others, the draft budget for 2023, the progress in the clawback, the primary care system, the real estate operator, the Land Registry and the forest maps, eight moves on the “front” of privatizations, etc.

According to members of the financial staff, the exit from the enhanced supervision is expected to work positively in the direction of upgrading the creditworthiness of the economy. The country is on an upward trajectory of credit rating agencies and needs the investment grade from at least one rating agency to participate in ECB financing programs. The goal is to obtain the investment grade within 2023, which is especially important especially in a period of rising borrowing costs.

“Since we are not at an investment level, Greece is more affected by crises, which exist and have an impact on their borrowing costs. So Greece, beyond any fiscal rules, must be very careful in public finances. “because the higher the cost of borrowing, the more it is passed on to households and businesses,” said Finance Minister Christos Staikouras.

That is, the minister gives the “signal” of a prudent fiscal policy, which will not jeopardize both the reduction of debt and the achievement of the goal of returning to primary surplus in 2023, as described in the Stability Program. This is also stated in the report for the European Semester: Member States with high debt, such as Greece, should pursue a prudent fiscal policy in 2023, in particular by limiting the growth of national current expenditure below the European average. and taking into account the ongoing, temporary and targeted support of households and businesses that are most vulnerable to rising energy prices. For the period after 2023, countries with debt over 60% of GDP should pursue a fiscal policy aimed at achieving gradual debt reduction and fiscal sustainability in the medium term, through the gradual reduction of deficits, investment and reforms.