New Greek loans prove elusive as talks near on post-bailout life

GREECE is not expected to get its next slice of financial aid just yet, as a couple of key reforms linked to the bailout loans remain outstanding, according to a report obtained by Bloomberg. The delay comes as the debt-ridden state seeks to convince investors and creditors it will soon be able to finance itself in markets without external help.

The final audit of the country’s up-to €86-billion ($107-billion) bailout is set to start later in February, less than six months before the program runs out in August. While Athens still has to complete two outstanding reforms before it receives the fresh loans, officials hope Greece will get the money within coming weeks, as talks are now centering on what arrangement the country should get after the the end of its eight-year financial supervision.

The two issues holding back Greece’s next slice of aid worth €5.7 billion have to do with a court decision to allow the privatization of an old airport to move ahead and progress on auctions of foreclosed property, according to the report. European Union and Greek officials hope the overhauls will be resolved ahead of the next bailout audit set to start on February 26.

An EU official said the new loans may not be made available until mid-March, partly due to the scheduling constraints of a German parliamentary committee that has to green light the disbursement.

They key question that looms, however, is whether Greece would be able to fully stand on its own feet once its bailout runs out, especially if the current global economic upswing weakens. A delay in the country’s latest bond sale due to sharp trading volatility and the recent spike in Greece’s 10-year bond yields, highlight the country’s vulnerability to external market conditions, EU officials say, raising questions about how it will fare without any external assistance.

Greece’s government aims to reach an agreement with its creditors on some kind of post-surveillance regime based on the model of Portugal or Cyprus, which will contain frequent reviews but no policy conditionality, a Greek government official familiar with the talks said, speaking of condition of anonymity.

Concern among creditors also stems from the fact that the end of the cash-for-reforms regime could chip away at Greece’s reform momentum—especially ahead of elections in 2019. In order to prevent Athens from reversing agreed reforms and boost spending to lure voters, creditors hope to establish an enhanced surveillance mechanism, whereby Greece’s progress with outstanding overhauls and fiscal discipline will be closely monitored.

“Privatizations need to continue, as do reforms of the public administration,” said Klaus Regling, managing director of the euro area’s crisis-fighting fund. “It would be a shame if the progress made so far were to soften at the end of the program,” Regling said in a February 15 interview with German newspaper Augsburger Allgemeine. 


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