Greece Won’t Reach Budget Targets After 2018–Greek PM

By Nektaria Stamouli 
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Greece’s Prime Minister Alexis Tsipras said the country won’t be able to reach its primary surplus budget target after its current bailout program expires in 2018 and called on the creditors to renegotiate for lower goals.

“We guarantee that we are going to reach the [3.5% primary] surplus, even if we have to use the fiscal brake, but only once in 2018,” Mr. Tsipras said late Wednesday during a briefing to journalists on the plane while traveling from China to Athens.

The Greek premier was traveling back to Greece from a five-day official visit to Beijing and Shanghai, designed to lure Chinese investment.

Under the terms of the third rescue program agreed last summer, Greece has to increase its primary surplus, excluding interest, to 3.5% of GDP by 2018 and maintain that in the medium term.

Greece has recently legislated a fiscal-mechanism that automatically cuts state spending if the country misses budget targets set under its bailout program.

The Greek premier said that maintaining the target “constantly is a joke; it’s a fairy tale.”

“We are telling [the creditors]… come on let’s get serious and look at what is going to happen in the next decade and set a sensible target of 1.5% to 2%,” Mr. Tsipras said.

The European Commission, the European Central Bank and the European Stability Mechanism predict the targets set for Greece are reasonable and even the most pessimistic of the creditors believe that its primary surplus could exceed 3% from 2018 until into the 2020s.

But the International Monetary Fund believes Greece won’t be able to achieve surpluses of more than 1.5% in coming years and decades.

Late May, eurozone finance ministers and the IMF struck a deal that cleared the way for fresh loans and set out how Greece could get debt relief in the future, moving to end a standoff with the IMF over the type and scale of relief Athens needs.

But the Eurogroup agreement sets up tough haggling over the country’s debt and economic overhauls for this fall and beyond. The Fund agreed in principle to rejoin the Greek bailout effort this year with new loans, while in return other eurozone countries pledged to restructure Greece’s rescue loans in 2018 “if…needed,” falling short of the IMF’s demands.

Mr. Tsipras said that debt relief measures will be further specified before the end of the year since it is a precondition for the Fund to participate in the program.

Greece has to negotiate with creditors a second set of economic overhauls for the second bailout review in the fall, which mainly includes a wide range of labor reforms.

“We want the review to be finalised by the end of October,” Mr. Tsipras said.

He said that the European Union’s economic affairs commissioner, Pierre Moscovici will visit Athens later in July to discuss ways to help ensure the quick pace of talks.

Write to Nektaria Stamouli at nektaria.stamouli[a]

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