Greece’s lenders insist the proposed spending cuts mechanism, the “cutter,” to include specific and concrete fiscal measures, thereby it is not certain that the bailout program review will be completed on the May 24 Eurogroup.
The automatic mechanism that would cut state spending would go into effect the moment Greece deviates from fiscal targets set. Athens has proposed that Eurostat figures released in April 2017 would be the factor to determine whether fiscal targets are met. If Greece is off course, then the finance minister will decide that a decree should be issued that would activate the spending cuts mechanism.
The International Monetary Fund proposes that creditors should be the ones to determine whether Greece is achieving fiscal targets, the way it happens now with the bailout program review. European lenders want to see clear descriptions of what would the exact cuts be and in which areas.
European officials have stated that the two sides have agreed on the packet of required measures that Athens will vote on Sunday, however the crucial details of the cutter remain pending. Therefore it is unlikely that the review will close on the May 24 Eurogroup, and much less any talks on the Greek debt to take place.
According to sources close to the talks, Tuesday’s meeting of euro zone finance ministers will probably approve a loan tranche of 10.7-11 billion euros, but the amount will not be disbursed at once. It will be disbursed gradually and based on prerequisites until the completion of the second bailout program evaluation, which will start in October and have its own packet of requirements.
The cutter will be included in an amendment that will be voted after the omnibus bill of required measures is voted in Greek Parliament.
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