Troika agreement
March 19, 2014
Following months of drawn-out negotiations, the Greek government on Tuesday (18.03.2014) secured the next installment of the country's massive bailout from the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), known as the troika of Greek lenders.
With Tuesday's agreement, the way should now be clear for the payment of loans amounting to some 10.1 billion euros ($14 billion). The sum is urgently needed in Greece, as the government needs to repay billions in maturing government bonds at the end of May.
"These were the most difficult negotiations with the creditors yet," said Greek Finance Minister Yannis Stournaras on Tuesday. "But I believe that we were able to achieve many of our goals." Discrepancies existed until only recently, particularly in much-needed structural and administrative reforms, as well as the liberalization of the labor market.
On these last stipulations, Prime Minister Antonis Samaras was reluctant to reveal any details. The conservative leader was particularly pleased that - just in time for the European election in May - he was able to come to the financial aid of society's most vulnerable. He explained that a total of one million people would immediately benefit from the financial support, to the tune of 500 million euros.
A whiff of election campaigning was evident in Samaras' speech. "We have promised to prevent a euro exit for Greece, and we managed that. We promised to leave the recession behind us, and we are just about to fulfill that promise. In addition, we have promised to pass on a portion of our surplus to the economy, to reward the Greek people for their extraordinary sacrifices. And we're doing that now," said Samaras.
Financial help in exchange for structural reforms
Samaras has often spoken of the newly generated "primary surplus" in the Greek budget, provided interest payments on outstanding debt to Greece's creditor countries are not taken into account. In plain English: According to Samaras, Greece is currently taking in more money than it's spending, if interest is not included in the calculations. An official statement from Brussels is not expected before the end of April, but Samaras in his speech did not hesitate to announce the distribution of a "social dividend" of the Greek surplus.
The prime minister also announced a reduction of social security contributions from July 2014, a move intended to give a boost to the labor market. According to Samaras, the promised financial assistance would especially benefit the poor and homeless, but also "the uniformed men who earn less than 1,500 euros a month." This last comment was apparently a reference to the police officers and professional soldiers who belong to the traditional supporters of Samaras' conservative ruling party.
Only toward the end of his speech did the prime minister address the "major structural reforms" agreed upon with the troika, calling them a way to "provide growth impetus to the economy to improve competitiveness and reduce prices," he said. Samaras added that such reforms had already been carried out by other European countries many years ago, and that now it was Greece's turn.
These reforms are likely to include the elimination of regulatory barriers in almost all areas of the Greek economy - from special taxes on foodstuffs to fixed prices on books, to sales restrictions on over-the-counter drugs.
Discontent in the ruling coalition
According to a recent report from the Organization for Economic Co-operation and Development, Greece is bringing up the rear when it comes to the liberalization of its economy.
Should the reforms be adopted, experts believe they could give a boost to the Greek economy of at least 5 billion euros. For this reason, the troika has strongly insisted on the implementation of the OECD recommendations - so far without success. But Samaras' comments on Tuesday have given an indication that economic reforms are now top priority.
However, Samaras should not expect his policy to be greeted without resistance from his own coalition government. For example: In a public appearance on Tuesday, Nikitas Kaklamanis, a conservative member of parliament and the former mayor of Athens, indicated that he was against the liberalization of the book market - not only for economic reasons but also out of a sense of patriotism. He said that there was currently an attempt in Greece to "dehellenize" the country - and the trivialization of the book was just another facet of that process.