After voting two sets of austerity omnibus bills, the Greek government is to enter a bailout negotiation process with a critical August 20th deadline.
Pierre Moscovici, the European Commissioner in charge of economic issues, has said that Brussels is opting for a new agreement in the second half of August. However, Athens has a crucial date to watch, and that is August 20 when 3.2 billion euros are due to the European Central Bank for maturing state bonds.
Greece cannot afford to miss that payment because it is the ECB that provides the country’s financial bloodline with emergency liquidity assistance (ELA).
It is not certain that negotiations will be completed in due time, European officials say, especially with the Greek government’s reluctance to implement some of the reforms. The ruling SYRIZA party is split in two over the new required reforms and lenders are skeptical if indeed Alexis Tsipras can rein his cabinet into implementing them.
Negotiations will be hard since labor laws and restrictions in the product market will be discussed. The Greek government is resisting on the issues of collective bargaining and mass layoffs. Athens has promised to modernize collective bargaining and collective layoffs and bring them in line with European Union rules, yet SYRIZA hard leftists are against these changes.
Also, the opening of “closed professions” and opening the sales of bread, milk and medicine to competition are met with the disapproval of certain sectors of the market.
European institutions are also not certain what the amount of the third bailout will be. Managing Director of the European Stability Mechanism Klaus Regling has said that his staff is preparing a bailout loan of “perhaps 50 billion euros,” according to a Financial Times report. Since the bailout program had an initial price tag of 86 billion euros, there is skepticism over where the rest of the funds will come from.
The International Monetary Fund said they are reluctant to disburse any remaining cash from Greece’s second bailout program — about 16.5 billion euros out of 28 billion — unless Eurozone governments write down a part of Greece’s debt. Also, since Greece has defaulted on the fund, the IMF may wait a long time before sending any more money to Athens.
So far the IMF has not sent a representative to Athens in order to negotiate the third bailout program because the Greek government had not send an official invitation to the fund. On Friday, Athens sent an official invitation to the fund.
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