24 Feb 2015
Downside elements on Greece compliance - ING
FXStreet (Guatemala) - Carsten Brzeski, analyst at ING Bank explained and noted that the Eurozone finance ministers just approved the first list of Greek reforms but highlights the downsides.
Key Quotes:
"On the downside, new efforts to increase labour market flexibility could in our view have been a bit more ambitious and tax reforms also remain limited. The plan also has some face-saving elements for the Greek government, eg no firm commitment to new privatisations, a gradual increase of the minimum wage and no cuts in pension payments."
"If implemented well, the measures should cut some slack in the Greek economy, make the welfare system more effective and could even lead to an improvement in Greece’s fiscal position. However, some note of caution remains valid as past experiences have shown that policy implementation in Greece is not always easily done. The latter probably explains the more reserved reactions from both the IMF and the ECB. Both just released official reactions on the Greek list, calling it a good first step but stressing the lack of specific details."
"Looking ahead, several national parliaments will have to ratify the deal (with the German Bundestag voting on Friday). In our view, the ratifications should be done deals."
"The bigger test for Greece will be at the end of April, the deadline by which Greece will have to present details and legislation of the planned reforms. If successfully done, the negotiations on a third bailout package, including the postponed discussion on Greek debt sustainability will start and could give rise to new tensions. In the short term, our view is that the Greek situation should calm down, at least until end of April."
"However, some risks remain, with in our view the two most likely being a break-up of the Greek coalition on the planned reforms and/or new unexpected fiscal surprises. As a consequence, Greece has now taken the next step towards an extension of the bailout loan. It’s not there, yet."
Key Quotes:
"On the downside, new efforts to increase labour market flexibility could in our view have been a bit more ambitious and tax reforms also remain limited. The plan also has some face-saving elements for the Greek government, eg no firm commitment to new privatisations, a gradual increase of the minimum wage and no cuts in pension payments."
"If implemented well, the measures should cut some slack in the Greek economy, make the welfare system more effective and could even lead to an improvement in Greece’s fiscal position. However, some note of caution remains valid as past experiences have shown that policy implementation in Greece is not always easily done. The latter probably explains the more reserved reactions from both the IMF and the ECB. Both just released official reactions on the Greek list, calling it a good first step but stressing the lack of specific details."
"Looking ahead, several national parliaments will have to ratify the deal (with the German Bundestag voting on Friday). In our view, the ratifications should be done deals."
"The bigger test for Greece will be at the end of April, the deadline by which Greece will have to present details and legislation of the planned reforms. If successfully done, the negotiations on a third bailout package, including the postponed discussion on Greek debt sustainability will start and could give rise to new tensions. In the short term, our view is that the Greek situation should calm down, at least until end of April."
"However, some risks remain, with in our view the two most likely being a break-up of the Greek coalition on the planned reforms and/or new unexpected fiscal surprises. As a consequence, Greece has now taken the next step towards an extension of the bailout loan. It’s not there, yet."