The Greek government is at an impasse after creditors require the legislation of fiscal measures beyond 2018, putting negotiations of the bailout program review on indefinite hold.
The prime minister and government officials are repeating that no new measures will be taken after 2018 — when the bailout program ends — and that creditors demand things that are not included in the agreement between the two sides. In addition, legislating contingent fiscal measures in advance is unconstitutional. Creditors, on the other hand, insist that Greece has not implemented certain reforms it has agreed to.
Greece is in the midst of a disagreement between the International Monetary Fund and European institutions over the sustainability of the Greek debt. The former claims that Greece’s sovereign debt is not sustainable, even if Athens manages an annual 3.5% primary surplus in the coming years. The European Stability Mechanism in a statement on Sunday said that the debt is manageable, provided that Greece follows through with all reforms creditors require.
However, the creditors’ negotiating teams of experts are not due in Athens to resume talks as the Greek side does not seem willing to take measures such as lowering the tax-free threshold for low incomes or making further pension reforms. There are also differences regarding labor laws and liberalization of certain markets.
Greek Prime Minister Alexis Tsipras will meet with French President Francois Hollande and ask for a political solution to the problem on the basis that the legislation of future fiscal plans is not in line with the Greek Constitution. Tsipras is also seeking a meeting with German Chancellor Angel Merkel for the same purpose.
Also, Athens is waiting for the release of the IMF report on the sustainability of the Greek debt on February 6. The report will determine the decision of the Fund board whether to participate financially in Greece’s bailout or remain as an advisor.