Big brother bailout: Troika to play hardball with Greece – report

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A document obtained by the Financial Times reveals the new draconian laws that are in store for Athens if it wants to get the €86 billion from its creditors.

According to the 29-page document acquired by FT, it becomes obvious that Greece’s left-leaning government will have its hands tied on all aspects of economic policy, starting from drug prices to tourist rentals, let alone tax administration. 

The first package of austerity measures needs to be implemented before the deal. PM Alexis Tsipras’ Syriza government will have to cancel cross-border withholding taxes, introduced recently. Among the other measures are raising the retirement age to 67, cutting drug prices and liberalizing energy supplies to homes by 2018.

After that, the austerity will continue, as Greece will have to adopt various fiscal, financial, regulatory and pension reforms and keep to a strict budget program. The country’s creditors are insisting on a prime target of a 0.25 percent budget deficit this year, and surpluses of 0.5 percent in 2016, 1.75 percent in 2017 and 3.5 percent in 2018.

Facing a 1.5 percent contraction in GDP this year, it will be a hard task for Athens to cut the 1.25 percentage points deficit in four months.

The FT, quoting unnamed European Union officials, says the EU acknowledges and expects a 2.3 percent fall in Greek GDP in 2015, and a 1.3 percent decline in 2016. However, the EU claims that Greece will achieve 2.7 percent GDP growth in 2017, followed by 3.1 percent growth in 2018.

Greece’s banking system will also be under strict EU control, according to the document.

“No unilateral fiscal or other policy actions will be taken by the authorities, which would undermine the liquidity, solvency or future viability of the banks. All measures, legislative or otherwise, taken during the program period, which may have an impact on banks’ operations, solvency, liquidity, asset quality etc. should be taken in close consultation with the EC/ECB/IMF and where relevant the ESM [ European Stability Mechanism, the EU fund that will bankroll the bailout],” it said. 

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The €50 billion privatization fund meant to collect and sell off Greek state assets to pay off creditors and recapitalize banks was a key condition when Tsipras reached an agreement with creditors in July. However, a decision on it how it will be established has been postponed until December. The fund will be located in Greece, not in Luxembourg as had been proposed by Germany, but the participation of the Greek government and how the fund will be established is still to be decided.