The dust has settled on the latest round of negotiations between Greece and her creditors and a clearer view can now be had of all the time-bound implications for the Greek government and people.
The raw bones of the agreement mean that a third bailout worth about 86 billion euros will be made available to Greece, while the Greek government must pass a raft of stipulated austerity measures in terms of an agreed timeline.
The Greek voters who rejected any form of austerity in the recent referendum were no doubt pleased to know that the European Central Bank (ECB) decided on Monday to maintain the emergency liquidity lifeline that is keeping the beleaguered banking system alive. While Greek banks will remain shut in the interim, cash withdrawals, in terms of the stringent capital control regulations, will continue.
Today is the first deadline faced by Prime Minister Tsipras to win parliamentary support for several of the austerity measures contained in the bailout proposal. A number of Syriza ministers abandoned Tsipras in the parliamentary vote which empowered him to make the proposals to the creditors. This was passed with the support of opposition parliamentarians.
The measures that have to be passed today must include legislation to streamline the VAT system and broaden the tax base, improve the long-term sustainability of the pension system as part of long-term pension reforms and lastly, to secure the legal independence of the Greek statistics office, ELSTAT.
Within the next week, but not later than 22 July, additional measures must be put into place as follows:
A Code of Civil Procedure to streamline the civil justice system in order to accelerate the judicial process and reduce costs.
While many of the existing Greek bank resolution laws share features of the EU Bank Recovery and Resolution Directive, BRRD, Greece in common with the other EU countries was obligated to pass laws in keeping with the directive by 1 January 2014. The BRRD must now be implemented with support from the European Commission.
The eurozone leaders said in a statement that the reform measures need to be “seriously strengthened to take into account the strongly deteriorated economic and fiscal position during the last year.”
Once these deadlines have been met, Greece has to speed up privatization efforts while Greek assets will be transferred to an independent fund and as these assets become monetized, the realized funds will be used to reduce government debt. This is expected to release about 50 billion euros, of which half will be used to recapitalize the Greek banks. The balance will be equally split between investments in Greece and for the reduction of the debt-to-GDP ratio.
Added to this, the Greek administration has to be modernized and streamlined in order to become more cost effective.
Finally, the lender institutions will monitor and assess the progress made in implementing the agreed reform and must also approve any legislation before it is submitted to parliament.