After stronger 2016, #Greece hopes lenders will drop austerity demands

Greece hopes stronger than expected public accounts in 2016 will convince its lenders to sign off on a bailout review without demanding more austerity, government officials said before a meeting of euro zone finance ministers, writes Lefteris Papadimas.

Last year’s primary surplus – which excludes debt servicing costs – reached 1-1.5% of gross domestic product, beating a target of 0.6% of GDP set in its bailout plan as the tax take improved.

“This performance will help us … offset the IMF view that Greece would need extra measures to plug a projected fiscal gap in 2018 to reach a 3.5% surplus bailout target,” one Greek official said.

Finance ministers are expected to discuss progress in Greece’s bailout review in Brussels on Thursday.

A euro zone official said there was “a good chance” they could agree to send negotiators back to Athens so that a deal approving completion of the latest bailout reforms could be reached in February.

Greece’s leftist-led government, which signed up to a new bailout program in 2015, wants to conclude the review to join the European Central Bank’s bond buying program, which would cut its borrowing costs.

It also wants to return to bond markets by the end of 2017, one year before its rescue program ends.

The IMF, which has yet to decide whether it will participate in what is the country’s third rescue program, says it cannot achieve its targets unless it adopts more austerity measures and is granted more debt relief.

The Greek government official said the latest primary surplus projection includes the impact of a one-off payout to pensioners of about 600 million euros. Greece has promised to achieve a primary surplus of 1.75% of GDP this year.

“Due to this (2016) performance, we are making a much better start in 2017,” the official said, referring to state revenues.

Prime Minister Alexis Tsipras, who is sagging in opinion polls, said on Wednesday (25 January) that Greece would not pass any more revenue-raising measures beyond what was agreed in its bailout package.

Although Athens does not face large repayments until the third quarter, the completion of the review is important to keep up reform momentum and projections of a strong return to growth.

“A further delay in the (review) negotiations …beyond the first quarter, must be avoided since it could put the 2016 positive momentum at risk,” National Bank economist Nikos Magginas said.