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Greece will rush to implement reforms and negotiate debt relief over the next few weeks, as it prepares for the Eurogroup’s next meeting on 21 June, and the end of its third bailout programme in August, points out Paolo Pizzoli, Senior Economist at ING.

Key Quotes

“Thursday’s Eurogroup meeting shed some light on the staff-level agreement (SLA) that was reached between Greece and institutions in the fourth review of the third bailout programme. This will involve an additional package of reforms, which will be implemented in the coming weeks.”

“The rush to implement the last bout of actions will run in parallel with negotiations on debt relief, which will hopefully be implemented at the end of the programme.”

“The G7 leaders’ summit early in June is seen as an opportunity to reach an agreement before the late June Eurogroup meeting.”

“The draft supplemental Memorandum of Understanding (sMoU), also published on Thursday by the EU Commission, shows unambiguously that the end of the third Greek rescue programme (at the end of August) will not mark the end of external constraints, even though Greece will not benefit from the relevant funding. The Greek government committed to meet at least another 20 post-programme obligations by 2022.”

“As far as fiscal sustainability is concerned, Greece confirms its commitment to deliver a primary surplus of 3.5% of GDP over the next five years. In order to meet this objective, a continuous effort will be made to improve tax compliance, fight tax evasion and manage public finances. This effort will be accompanied by measures meant to protect vulnerable groups.”

“The principle inspiring future budget adjustments will be to introduce more growth-friendly policies while assuring fairer distribution and burden-sharing through compensating measures.”

“Greece continues to move towards the end of its bailout programme. No reference has been made to how “clean” the exit will be, but the additional set of measures that the Greek government committed to in the supplemental MoU make the “clean” option less valuable from a political point of view. The Enhanced Conditions Credit Line (ECCL), with its implicit access to ECB funding, remains in our view a valuable backstop solution for a country whose actual growth prospects are yet unknown.”