Athens Digest 12.03.2018

• Just another Eurogroup meeting till… the next one. Bailout reviews but no debt talks on the agenda today

• Regling says ESM buy-up of Greek debt is on the table

• Kammenos stance on soldiers highlights divisions in coalition government

• Conservatives maintain 10 point lead over ruling SYRIZA


# With discussion on Greek debt relief deferred, most likely to April, the Greek finance ministry doesn’t expect anything new to emerge from today’s Eurogroup in Brussels other than the official conclusion of its third bailout review and the disbursement this week of a EUR 5.7 billion tranche. The government, which is seeking to stay on course to complete its fourth bailout review, also expects the positive the assessment of the first mission of creditor representatives to Athens in late February.

# Meanwhile, as technical talks to link debt repayment to growth are set to continue this month, the head of the ESM Klaus Regling said in an interview to the Proto Thema newspaper that the European institutions and IMF are “working hard” to agree on a common debt sustainability analysis, so that the IMF will get on board. Greek debt relief hopes were boosted last week after the IMF indicated that it could back an ESM buy-up of the debt. Regling said this option is on the table. “We know IMF loans are expensive compared to ESM loans. Buying them out to do that kind of liability management would improve Greece’s debt sustainability,” he said, adding that decisions will be taken near the end of the program. He also stressed that there must be no backtracking in fiscal measures and that reforms must proceed.
By activating its in principle agreement with Greece, the IMF will participate in the upcoming negotiations between the quartet and the Greek government in May, for the first time having an actual programme. The Fund’s mission will review the 22 prior actions of its own programme (the ESM’s to-do list includes 88) as well as the performance of the country’s economy including the status of its banking sector.

# The tougher stance adopted by Defense Minister Panos Kammenos compared to that of Premier Alexis Tsipras with regard to the two Greek soldiers arrested in Turkey has reportedly highlighted cracks within the leftist-led coalition government. Last week, Kammenos, the leader of right wing coalition partner ANEL, described the soldiers that entered Turkey during a border patrol in bad weather, as “hostages.” On Saturday, while in an interview to France’s Liberation, he said Greece is “very close to a fatal accident with Turkey”, referring to Turkish violations of Greek air space and territorial waters. Tsipras has pursued a less inflammatory approach, saying he doesn’t want the issue to escalate into a full-blown diplomatic fallout. With the ideological divide in the coalition manifesting, Tsipras is reportedly seeking allies and meets today with Stavros Theodorakis, the leader of centrist party To Potami to discuss the latter’s proposal for the creation of a national security council. “Movement for Change” party leader Fofi Gennimata described his partner’s participation in the meeting as “politically naive” as it has been viewed as an effort by Tsipras to drive a wedge between his center left rivals.

# Deteriorating Greek-Turkish relations will be on the agenda of the US Assistant Secretary of State for European and Eurasian Affairs Wes Mitchell, who is expected to visit Athens next Thursday. Prior to his arrival in Athens, Mitchell will first visit Pristina, Skopje and Belgrade. On Friday, he will be in Nicosia, concluding his 5-day schedule in the region without visiting Ankara.

# Main opposition New Democracy maintains a 10.2 % lead over ruling SYRIZA, according to a poll of voter preferences conducted by RASS on behalf of the Action 24 TV station. The poll, conducted nationally from March 6 to 8, showed that 29.4 percent of those surveyed said they would vote for the conservatives compared to 19.2% for SYRIZA. In contrast to previous polls, the center-left Movement for Change opened up a gap with the extreme right Golden Dawn, garnering 10.2 percent compared to 7.2 percent. Last week, police unraveled a militant neo-Nazi group calling itself Combat 18 tied to more than 30 attacks. Communist KKE was on 6.3 percent while coalition partner ANEL was below the 3 percent threshold to enter Parliament with 2.5 percent. The polls also showed a pessimistic outlook with regard to the economy as 75% said that social and economic policies will not improve in favor of the people after Greece’s bailout ends in August.



On the radar: Tax rates reduction battle
New Democracy and the government have embarked on a campaign to woo the country’s middle classes with promises to ease their tax burden. In an interview yesterday with the Eleftheros Typos newspaper, ND leader Kyriakos Mitsotakis reiterated his commitment to reduce corporate taxes from 29% to 20 percent, reduce contributions, simplify licensing rules for investments and slash the highly unpopular property tax, ENFIA, by 30 percent. He added that Greece’s creditors will go along with his proposals once they realize that his administration has a structured plan that it is determined to implement. For his part, Finance Minister Euclid Tsakalotos said in an interview yesterday to the Real News paper, that the tax burden on both lower and middle classes will be gradually lifted beginning in August, but stressed however that the government will not be derailed from its fiscal course.