Greece has moved one step closer to unlocking a crucial tranche of bailout aid, according to the FT:
Greece has struck a deal with its creditors on reforms the country must carry out in exchange for continuing to receive money from its €86bn bailout programme.
The deal, which encompasses pension cuts, a widening of the tax base, and other reforms has been months in the making and was closed during intensive talks this week. […]
The deal, which requires Greece to legislate now on reforms that it will roll out in 2018 and 2019, is a key stepping stone in bringing the International Monetary Fund into the bailout as a full financial partner, a key requirement for Europe’s largest creditor state Germany.
Eurogroup negotiators are already patting themselves on the back for the progress made, but it’s not time to break out the ouzo just yet. For one, Alexis Tsipras’ government hardly has an inspiring track record in actually implementing the belt-tightening fiscal reforms he has promised. And such commitments have always been made on the basis of vague and fuzzy expectations. The new reform package, we are told, is supposed to help Greece reach its 3.5% budget surplus target by 2018 and maintain it over the “medium term”. That figure alone sounds insanely optimistic, and there is no consensus between Greece and its creditors over what the “medium term” even means.
With the IMF now looking more likely to finance the bailout, the next round of talks is likely to get more heated. Next up for discussion is the delicate topic of Greek debt relief—which is opposed by Germany as staunchly as it is insisted upon by Greece and the IMF. Expect a lot more haggling and grandstanding before any potential deal is reached.