Monday’s Eurogroup did not provide any definitive answers regarding the negotiations between Greece and the institution over the 2019 budget but the indications are that Athens will be allowed to scrap next year’s pension cuts if it can re-assure the lenders that the 3.5 percent of GDP primary surplus will not be put at risk.
All eyes will be on the dispute of Italy’s budget at Monday’s Eurogroup, but in Greece the government is preparing to start legislating fiscal measures even though the disagreement over its own economic plan for 2019 does not seem to have been settled yet.
The International Monetary Fund has officially indicated that although it believes Greece should implement the pension cuts it has agreed for next year, it will leave it up to Athens and its European lenders to come to an arrangement over the 2019 budget.
It appears that Greece and its European lenders will attempt to settle the pension cuts issue at a special Eurogroup meeting that is due to take place on November 19 with the primary aim of preparing eurozone reform measures for the European Council to discuss in December.
It appears that the institutions are set to grant the Greek government’s request regarding the cancellation of the pension cuts that were due to kick in next year, but reports suggest that Athens and its lenders may still need to agree on a way to bridge an apparent fiscal gap in 2019.
The Greek government is expected to submit to the European Commission a version of its 2019 budget that is along the lines of the draft plan submitted to Greek Parliament on October 1, which includes a scenario in which the 1 percent of GDP in pension cuts agreed with the institutions are applied and one in which they are not.
The Greek government was given the clearest indication yet on Monday that its European lenders may agree to its request to scrap the pension cuts that are due to be implemented from the start of next year.
The Greek government will not include next year’s pension cuts in the 2019 draft budget due to be submitted to Parliament on Monday as it steps up its efforts to scrap the measure, which was pre-legislated last year.
The Greek government is set to take the next step in its efforts to call off next year’s pension cuts, when it submits the draft 2019 budget but finds itself in a delicate balancing act between domestic political pressures and the creditors’ concerns.
Finance Minister Euclid Tsakalotos is due to speak with investors in London on Thursday but it is the discussion with the institutions over next year’s pension cuts, rather than market access or investments, that is topping the agenda at home.