Greece and its creditors are discussing an extension of the country’s bailout program through March 2016.
A nine-month extension would help carry Athens over its current funding gap. It would also give both Prime Minister Alexis Tsipras and his country’s creditors—the eurozone and the International Monetary Fund—more time to chart a new path for Greece’s economy.
The proposal, first presented last week, is part of European officials’ efforts to prod the government in Athens to agree to deliver a package of steps that includes higher taxes, state asset sales and less generous retirement benefits, in exchange for rescue funds.
While Germany still insist Greece will eventually have to painful concessions, such as trimming retirement benefits, they may settle for a clear commitment to the institutions by the Greek government to just one measure up front to unlock aid, Bloomberg reports.
Germany also wouldn’t object to extending the aid program again if Tsipras presents specific policies to meet the goals of the memorandum of understanding agreed with Greece’s EU partners on February 20.
Moreover SYRIZA's parliamentary spokesman of Nikos Filis yesterday admitted during a television interview that the memorandum of understanding is not abolished. The government's aim is to be able to remain under the economic "protection" of Europeans (even if the IMF does not give any more money) in the next nine months. Government officials consider that such an eventuality would help boost the economy and bring to an end uncertainty and doubt. Nevertheless a possible extension of the memorandum will prohibit Greece for making any unilateral move with out its lenders approval.
The Greek government anticipates receiving funds from the European Financial Stability Fund (EFSF), and has asked creditors for ESM money to repay the European Central Bank. Based on these data, the Greek government appears willing to discuss the targets for primary surpluses, noting, however, that nothing is finalized. The negotiations in this direction are ongoing at all levels, Greek government official say, while stressing that the PM's meetings in Brussels with European leaders and EU officials will pave the way for an agreement.
Greece's government is sticking to its non-negotiable "red lines" on labor and pension issues as it has ruled out the abolition of the Pension Social Solidarity Fund (EKAS) or increasing VAT on power bills by 10 percentage points. Restoring collective bargaining rights and raising minimum wage level to pre-crisis levels - pledges Tsipras made before coming to power in January – will remain in limbo. Concerning primary surplus the Greek government has proposed a 0.75% surplus for the full year 2015 and 1.75% for 2016.
The Greek proposal includes debt restructuring as a condition for any new agreement. According to government sources, Greece aspires to receive funds from the European part of the current program, money from the European Financial Stability Facility (EFSF) and a debt exchange between the European Stability Mechanism (ESM) and the European Central Bank (ECB).