Greece Has Until June to Implement Last Batch of Bailout Actions

  • Energy reforms and privatizations are among biggest challenges
  • IMF may pressure government to frontload austerity measures

Greece must implement 77 measures in the next three months to wrap up the fourth review of its current bailout and ensure a successful program exit in August.

The government held preparatory talks for the review with representatives of Greece’s creditor institutions in Athens this week. While the discussions went smoothly, they touched on reforms that are likely to become flash points in the period ahead -- including politically-contentious privatizations and liberalization of the energy sector, as well as less controversial but technically difficult changes to how tax authorities assess property values.

Two more issues loom that are making officials nervous. One is that the International Monetary Fund might insist a previously-agreed income tax hike has to be brought forward by a year, to 2019, if the government is to hit its primary budget surplus target. The other is that the country’s banks could need fresh capital injections if regulator stress tests show them coming up short.

Both subjects will come under the microscope in a future round of talks in May.

Completing all the measures -- which Finance Minister Euclid Tsakalotos said has to happen by June 21 -- will release 11.7 billion euros ($14.4 billion) in bailout loans. It will also pave the way for Greece and its creditors to make decisions on debt relief and a post-bailout framework for the country.

List Highlights

Here are 10 of the most difficult or controversial things Greece needs to do:

  • Legislate a medium-term fiscal strategy for 2018-2022. The government will also bring forward the personal income tax measures to 2019 if the IMF, in cooperation with the European institutions and the Greek authorities, considers that a frontloaded implementation is needed for a primary budget surplus of 3.5 percent of gross domestic product 
  • Recalibrate pension benefits, and issue the ministerial decision that will set all the details for the award of the EKAS social allowance in 2019
  • Implement all necessary steps for the government’s effective divestment from the lignite market, as well as officially launch an international open tender procedure by Public Power Corporation
  • Clear all arrears to PPC owed by public entities
  • Reduce the supplier surcharge on providers of renewable energy, and agree by the end of 2018 a plan to replace it
  • Eliminate all conflicts of interest between the state-controlled natural gas supplier, Depa, and local gas supply companies
  • Adjust property tax rates and broaden the base, if necessary, in a revenue neutral way
  • Eliminate the VAT discount on islands where it is still in place
  • Start procedures to sell or monetize 17 percent of PPC, as well as various steps to advance the privatizations of Depa, Hellenic Petroleum, Athens International Airport, Thessaloniki Port Authority and Egnatia Highway. Replace board members in state-owned enterprises, where needed after review, and submit business plans for them 
  • Fully implement the legal framework for financing of political parties

— With assistance by Paul Tugwell

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