Not So Fast: Troika Talks Tough

Greece’s claim that a deal with its international lenders was imminent over unsettled reforms and a hole in the 2014 budget appeared overly optimistic as the two sides became involved in tough negotiations that must be finished before a next installment of rescue monies is disbursed. Envoys from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) began the new round of talks with Finance Minister Yannis Stournaras, trying to break a six-month deadlock over disputed areas but the going was reportedly slow, dimming the government’s prospects for a swifter resolution. The big hang-up is the size of a primary surplus which the government says is as much as 1.5 billion euros ($2.07 billion) and a trigger to ask for debt relief from the $325 billion owed in two bailouts. That money runs out this year and Greece needs the next installment to meet a big bond payment in May. That has already been undercut by reports the country’s highest court will rule unconstitutional the pay cuts to members of the military and retroactive services that were part of austerity measures insisted upon by the lenders. That could cost the government 500 million euros ($687.7 million) and has led other public workers to demand the same treatment. The auditors’ questioning of the surplus figure means the European Commission’s statistics service, Eurostat, will decide whether certain revenues used by Greek officials in their calculations should count toward it or be shifted to the 2014 budget as the government tries to delay adverse effects ahead of May municipal and European Parliament elections. Another major obstacle now for the government is that the Court of Audit also has deemed unconstitutional giant cuts in lump sum payments pensioners receive, up to 38 percent and more. The court said the government can’t touch the money because it was deducted from workers salaries over the years for their retirement and belongs to the beneficiaries. That case will now before the high court, the Council of State, and, if upheld, could cost the government billions. It was expected that the issue of court rulings would be raised by the troika as their arrival in Athens coincided with a decision by the Court of Audit deeming as unconstitutional the reduction of civil servants’ lump sum pension payments. The case, which will now go to the Council of State, is the latest legal ruling to challenge troika-imposed measures. Talks also focused on key reforms that auditors are pressing for – the implementation of market-liberalizing measures set out in a report by the Organization for Economic Cooperation and Development (OECD), an overhaul of the civil service and the reduction of employers’ social security contributions among other reforms. Prime Minister Antonis Samaras has stressed that the OECD’s recommendations, dubbed “the toolkit” by the Troika, is “not gospel,” and that they don’t have to followed religiously. Some 153 reforms remain undone. Some of the Troika’s proposals, including the extension of the shelf-life of fresh milk and giving supermarkets the right to sell over-the-counter medicines, are expected to be challenged as Samaras, buoyed by the primary surplus, has been digging in his heels after relenting to the lenders since he took office in June, 2012. He embraced austerity after previously opposing it.

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