Athens Digest 19.04.2018

• Stournaras upbeat on stress tests, touts post-programme waiver

• Athens scotches talk of accelerated austerity

• EU-Turkey deal ‘won’t collapse’ after court ruling on migrants

• Foreign Minister: FYROM talks facing delays

# Bank of Greece Governor Yannis Stournaras says Greece should keep its so-called waiver facility with the ECB after August, revisiting the question of a clean bailout exit. Speaking at an event organised by the Hellenic Alumni Association of the London School of Economics in Athens, he signalled his concern over Greece’s quest for a full market return while it still has a low credit rating. He suggested that Greece should maintain access to the cheap funding for banks and ease its way back to market conditions rather than strive for a clean break. The issue has kept him at odds with the government, after Stournaras repeatedly expressed support for a precautionary credit line from bailout lenders after the programme ends. Greece’s banks, he said, have now gained a more robust position and were expected to emerge from current stress tests with “positive results.”

# Government officials strenuously rejected speculation that a budget correction will be brought forward by sobering IMF growth forecasts. “Certain parts of the news media see catastrophe and more (austerity) measures in their sleep,” a government official said. “The IMF’s forecasts have frequently been inaccurate.” Revised IMF growth forecasts spurred reports that post-programme measures planned over two years, with additional pension savings and by lowering the tax threshold, could all be pushed into the 2019 budget to keep Greece on fiscal track.

# The EU-Turkey agreement on migration is not dead despite a landmark Greek court ruling that migrants and refugees reaching the islands in the eastern Aegean cannot be held there, officials in Athens said. The decision by the Council of State took effect on Tuesday and is likely to create a troublesome two-tier asylum system on the islands. Newly-arrived migrants and refugees will be free to travel to the mainland while thousands restricted before the decision will be forced to remain. Deputy migration minister Yiannis Balafas acknowledged the new regime would “create difficulties.” But he added: “I don’t think the 2016 EU-Turkey declaration will collapse because of this ruling.”

# Foreign Minister Nikos Kotzias cautioned that talks with FYROM are unlikely to be concluded before NATO’s midsummer leaders’ summit, and he criticised the country’s leadership for making public statements that could limit their options in negotiations with Greece. Kotzias said in a radio interview that a summer deal now appeared unlikely. Despite Kotzias’ remarks, EU foreign policy chief Federica Mogherini told reporters during a visit to Skopje that she believed a deal could be reached by late June. She visited Skopje and Tirana a day after the EU Commission recommended that both countries start EU membership talks.

On our Radar: Snap Turkey Poll Concern
Kotzias, in the interview, warned of a further build up in tension with Turkey over the next few weeks after President Recep Tayyip Erdogan called a snap election for June 24. “I think the coup attempt played a key role and strengthened the sense of arrogance. This fact as well as early elections will also play a part in fuelling the tension,” he said. The sustained animosity in the Aegean Sea has worried NATO allies including Britain. Speaking in Greek, UK Ambassador to Athens Kate Smith spoke on state TV and said her government backed recent EU statements critical of Turkey’s actions in the eastern Mediterranean. “We believe that every action, behaviour, and statement that intensifies that situation should be avoided,” she said.