Expectations low for Eurogroup as talks over Greece drag on

Greece and its lenders are to go into Monday’s Eurogroup meeting in Brussels with few expectations of a breakthrough and the best-case scenario for Athens being an agreement for the institutions and their mission chiefs to return to the Greek capital.

A number of unresolved issues remained after a week of negotiations between Greek officials and the creditors via teleconference last week. These included disagreements over pension cuts, expansionary counter-measures, energy market liberalization and labor reforms.

The lenders are demanding that Greece reduces its pension spending by 1 percent of gross domestic product in 2020, but Athens would like to phase in the cuts between 2020 and 2022.

To counteract the impact of the new fiscal measures, including a large reduction in the tax-free threshold for incomes, requested by the creditors, the Greek government wants to implement the equivalent volume of interventions. Athens has accepted the institutions’ proposal to reduce corporate tax but also wants to include other measures, such as lowering the ENFIA property tax, to ease the burden for Greeks on low incomes.

With regards to the deregulation of the energy market, there is still no common ground over how to move forward.

Green light for the sale of PPC units

The creditors appear to believe that the current method of auctioning off electricity to allow third-party access to the market is not effective enough to reduce the Public Power Corporation’s share below 50 percent of the total by 2020, as previously agreed. The government, though, seems reluctant to give the green light for the sale of PPC units instead.

In terms of labor reform, there was no progress last week and substantial differences remain between Greece and the International Monetary Fund, as well as between the European creditors and the Washington-based organization.

This means that the most that can be expected at the Eurogroup is for all sides to agree there is enough common ground for the missions to return to Athens to continue negotiations with the aim of reaching a staff-level agreement. The IMF, however, has made it clear that its officials will not get on an airplane unless there is an agreement on the pension, labor and energy issues.

Greek government sources said the prime minister’s office is receiving mixed messages about what response to expect from the institutions at the Eurgroup, which is one of the reasons why Prime Minister Alexis Tsipras has refrained from commenting on the negotiations in any detail.

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