A deal for perpetual debt servitude

Greece has agreed a deal in principle with its lenders about a third bailout, worth around €85bn and allowing some €10bn to be disbursed to the country’s struggling banks almost immediately. There is a long list of reforms the country has to carry out in return for the cash. Out of the first 20 bn euro installment Greece hopes to receive before next week , 7 bn euro will be returned to the ESM for the bridge loan used to pay the IMF, 10 bn euro will be used immediately to support the banks and 3 billion will be use to repay the 3.1 bn loan due to the ECB on 20 August

But the agreement needs to be approved by state parliaments, with Greece set to discuss it on Thursday. The Eurogroup of finance ministers is expected to meet on Friday to examine the deal, after conference calls between deputies taking place today.

Meanwhile Germany – which seemed to be pressing for a bridging loan for Greece to allow more time to discuss the details of any agreement – has said it would “closely examine” the bailout deal.

Reuters has compiled a list of the measures  Greece needs to implement in return for securing up to €86bn in fresh loans:

– Greece to produce primary budget surplus starting 2016.
– Primary budget deficit of 0.25% of GDP in 2015, followed by surpluses of 0.5% in 2016, 1.75% in 2017, and 3.5% in 2018.
– Greek economy to shrink between 2.1% and 2.3% in 2015, contract by 0.5% in 2016, and return to 2.3% growth in 2017.

Some of the “prior actions”, or measures required before bailout aid is disbursed, are expected to include:
– New laws on non-performing loans held by banks.
– Deregulation of the natural gas market.
– Setting up an independent sovereign wealth fund in Greece intended to raise €50bn, three-quarters of which would be used to recapitalise banks and decrease debt.
– Scrapping tax breaks for farmers who now receive subsidised fuel.
– Tighter regulation of a repayment system for individuals owing back taxes to the state.
– A gradual increase in a system under which taxpayers ranging from the self-employed to small businesses pay tax in advance on their forecast income.
– Increase to 6% from 4% of a “solidarity tax” paid by those earning €50,000-100,000 a year.

Greece passed a number of reforms in July including:
– Simplifying VAT rates and applying the tax more widely.
– Cutting back on pensions and making the national statistics agency independent.
– Measures to overhaul the civil justice system
– Adopting EU bank resolution and bail-in rules, applicable from 1 January, 1 2016.

Greece’s bailout agreement is also expected to set a clear timetable for the following measures:
– Ambitious pension reform.
– Reforms covering Sunday trading, pharmacy ownership, milk sales and bakeries.
– Privatisation of electricity transmission network.
– Review of rules on collective bargaining, industrial action and collective dismissals.