After weeks of negotiations, Greece and its creditors reached an agreement April 7 on a series of reforms that Athens will have to implement to comply with its bailout program. As part of the agreement, inspectors from creditor institutions will visit Greece in the coming days. While the April 7 agreement puts the bailout program back on track after months of delays, important questions such as the disbursement of the next tranche of financial aid for Greece, the participation of the International Monetary Fund (IMF) in the program, and the granting of debt relief measures were not addressed.
In a press conference, the president of the Eurogroup, Jeroen Dijsselbloem, announced that Greece promised to apply cuts to its pension system in 2019 and tax reforms in 2020. The timing of the reforms is important: Athens has tried to delay the introduction of controversial measures as long as possible because general elections are scheduled for late 2019. Dijsselbloem also said that Athens will be allowed to introduce unspecified "expansionary countermeasures" to soften the social and political impact of the controversial reforms in pensions and taxes.
Greece's creditors remained vague on several important issues. According to Dijsselbloem, an analysis of the sustainability of Greece's debt will be performed in the coming weeks. This is a vital issue for Athens, because the Greek government has promised voters that painful austerity measures are necessary in exchange for concessions to alleviate Greece's debt burden. Without a promise of debt relief, it will become increasingly difficult for the ruling Syriza party to address public criticisms and ease friction within its own government. At the same time, the German government wants to delay the introduction of any debt relief measures at least until after the German general election in September. Dijsselbloem was also vague on the timing of the release of the next tranche of the Greek bailout. Greece faces some 6 billion euros ($6.37 billion) in debt maturities in July, which means that the creditors still have time to delay the release of the funds and keep the pressure on Greece.
Finally, the issue of IMF participation in the Greek program remains unaddressed. According to Dijsselbloem, the IMF backed today's agreement. But the institution has yet to announce whether it plans to join the Greek bailout. This is a key issue for Germany's government, which promised lawmakers that the IMF would be involved in the Greek program. In an interview published in German media on April 7, German Finance Minister Wolfgang Schaeuble said that IMF participation is key, regardless of the sum it contributes.
With an agreement on the size and the timing of the measures in place, and with inspectors from the creditor institutions returning to Athens, the Greek government will now have to convince lawmakers to approve the measures that were discussed today. In recent weeks, members of the Syriza party have criticized the concessions that Athens had to make to keep the bailout program alive. Greek Minister of Finance Euclid Tsakalotos admitted April 7 that some of the measures agreed today "will upset the Greek people". The Greek parliament will probably start the debate on the measures in late April or early May.
