Critical votes on prior actions and budget

New Democracy and PASOK officials were hopeful that both the omnibus bill, including structural and labor reforms and the 2013 budget, will be voted in the parliament next Wednesday and Sunday respectively estimating that 153-157 MPs will back the measures.

Reportedly, PM sources said that contact with the coalition parties and the troika would continue until Wednesday’s vote, but it was unlikely that any major concessions would be made.

Following a meeting with PM Sunday evening, the leader of Democratic Left Fotis Kouvelis told reporters that “I repeated my dissent on labor issues”. Asked whether his party will remain in the coalition government he said “Of course. There is no such choice for us, to create a rift in the government”. Note that the executive and the parliamentary committees of Democratic Left will convene today to reach a final decision on the party’s stance in the upcoming votes in the parliament.

According to Der Spiegel, eurozone FinMins have drawn up a contingency plan that aims to avoid a new haircut on Greek debt. The plans provides for: a ) a reduction in interest rates on existing loans, b) extension of the maturities of GGBs held by ECB and c) ECB will return to the Greek government the profits stemming from the purchase of GGBs at market prices, i.e. significantly lower compared to nominal price. Same source also notes that Greek bank recapitalisation will be carried out through ESM, which will also allocate money for a debt buyback.

IMF

During a press briefing held last week, IMF spokesman Gerry Rice said that “we welcome that most policy issues between Greece and the troika are being settled and staff level agreement on economic policies could come soon. Before the first review under the Expanded Fund Facility arrangement with Greece can be completed, understandings must also be reached between Greece and its creditors on financing terms consistent with debt sustainability. There are four big components that have been discussed: the fiscal reforms, the structural reforms, where good progress appears to be made, and still under discussion are the financing issues and financing consistent with debt sustainability which is the fourth issue”.

Asked whether IMF would recommend any particular way (Greece) to reduce its debt, he noted that “On the debt reduction issue generally, our view is that there are many options to help reduce Greece’s debt burden and they should be considered. Buy-backs could be useful if they were implemented in such a way to deliver a meaningful reduction, and I think that’s the important point, again, to make sure that this is a meaningful reduction. I think it’s critical for the program’s credibility that Greece’s debt burden be sustainable, so that that’s really the key in looking at the different options”.

Asked why IMF insists on labor reforms, he noted that “what we’ve been engaged in alongside the EC, ECB and of course working with the Greek government is to get the program back to on track with the objectives of restoring growth and with the objectives of increasing employment as fast as possible. The package of measures including labor market reforms are part of that. These are not something imposed by the IMF in a unilateral way. They are part of the discussions both with our partners and with the Greek government. Then I think on your point about the internal political support for those measures, I really think that’s a matter for the Greek government to pursue”.

Euroxx  Research

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