by Nikolaos Chrysoloras Fred Pals Rebecca Christie 2:24 PM PST | February 23, 2015
(Bloomberg) -- Greece’s month-old government is about to find out whether a package of new economic measures sketched in recent days is enough to win more funding from the rest of the euro region to keep the country solvent.
A draft list of commitments was under discussion with the International Monetary Fund, the European Commission and the European Central Bank after Finance Minister Yanis Varoufakis sent it to the institutions and Jeroen Dijsselbloem, president of the euro-area finance ministers group, before the midnight deadline on Monday. The group is scheduled to hold a conference call on Tuesday to assess the measures.
Based on a provisional agreement between Greece and its official creditors on Feb. 20, the approval of the list is a condition for extending the availability of bailout funds for another four months. The current program, which has been keeping Europe’s most indebted state afloat since 2010, is normally scheduled to expire on Feb. 28.
“I am very confident,” Dijsselbloem, who is also Dutch finance minister, said in an interview at an event in Tilburg, the Netherlands, on Monday. “The Greek government has been very serious, working very hard the last couple of days. We need it to be strong enough to work on the next couple of months. I am always optimistic.”
Approval of the Greek plans would offer a short reprieve for the country, which risks defaulting on some of its liabilities as early as next month without further financing from the creditor institutions. At the same time, Prime Minister Alexis Tsipras must try to avoid defections within his anti-austerity Syriza party after it won power on pledges to take back control of Greece’s finances.
IMF Managing Director Christine Lagarde said she hoped there would be a “meeting of the minds” between Greece and the rest of Europe on the changes needed.
“Greece has to go through very in-depth, sometimes difficult reforms,” she said in an interview on HuffPost Live on Monday. They “will have to tackle vested interests, protected professions, rigidity in various markets,” she said.
The government said in a statement the same day that the list will include all of Syriza’s pledges for “alleviating the humanitarian crisis” and the cabinet will convene on Tuesday after the document goes to finance ministers.
The list will also include commitments to change the labor market and measures to protect homes from foreclosures and combat tax evasion, according to a Greek official.
The European Commission considers the list comprehensive enough to be a starting point to successfully conclude the review, according to an official at the commission who asked not to be named because the talks are continuing. It was encouraged by the commitment to combat tax evasion and corruption, the official said.
The package would then be put to national parliaments for formal consent, though lawmakers and officials in Germany, Finland and the Netherlands signaled they won’t stand in the way once their governments grant consent for the aid extension.
“This compromise deal, given that it will be finally approved and validated by the national parliaments in the next few days, is a positive development for Greece and the capital markets as it removes the imminent threat of ECB pulling the plug on the Greek banks,” Vangelis Karanikas, head of research at Athens-based Euroxx Securities wrote in a note to clients.
Greek government spokesman Gabriel Sakellaridis said earlier that the list will include fighting corruption and changes to the tax system.
There are still plans to increase the minimum wage, introduce legislation on bad loans and back taxes and maintain pensions, he said. It will also restore collective bargaining for unions. They are “red lines,” said Sakellaridis.
Tsipras, 40, has said the agreement “cancels austerity” and annuls pledges by the previous government to cut wages, pensions and state employees and increase sales taxes.
The agreement permits Greece to lower previously agreed upon targets on a primary budget surplus, which doesn’t include interest payments on debt. That could give Tsipras some room to at least come good on some pre-election pledges.
In return, though, the Greek government will refrain from unilateral action that may risk budget goals and not annul most economic reforms included in the bailout agreements.
Since its first international bailout in 2010, Greece’s economy has shrunk by about a quarter and it’s shouldering the highest unemployment in the euro region.
The Greek Parliament will approve the list of measures even if Syriza doesn’t fully meet pre-election promises, George Stathakis, minister for economy, shipping, tourism and infrastructure, said in an interview with Sunday’s Kathimerini.
Environment and Energy Minister Panagiotis Lafazanis, though, told Real News in an interview that Syriza’s “red lines won’t be violated, that’s why they’re called red.”
“The agreement includes several concessions by the Greek side, but it also enables the government to save face internally,” analysts at Athens-based Eurobank Equities, including Nikos Koskoletos, wrote in a note to clients dated Feb. 24. “Having said that, the agreement does not address the coverage of Greece’s financing needs, especially in the context of the present tight situation as regards available cash buffers in the coming weeks.”
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