Beware of Greeks bearing fresh spending plans

Not so long ago, at the height of the so-called Eurozone crisis, the phrase “Greek debt” graced headlines and news bulletins on a daily basis, and remained at the forefront of investors’ minds for weeks, if not months at a time.

In the current age of Brexit and Conservative party resignations, that is no longer the case. But for Greek citizens who have suffered years of government cuts and international opprobrium, the issue has never faded from the national consciousness.

And that holds just as true for an army of European bureaucrats and politicians, who are now tasked with closing the book on what many consider to have been the most frightening chapter in modern Europe’s financial history.

In a couple of weeks’ time, a group of international debt inspectors will land in Athens, where they will gain access to the Greek government accounts and pore over its policy proposals for what may be the final time. If this team of forensic economists comes away satisfied with the local authorities’ reform efforts, as well as their finances, it should in theory mean that European leaders will be able to settle on a long-term plan for the struggling country’s hundreds of billions of euros in outstanding debts by the end of June.

The unravelling then repackaging of Greece’s national debts has proved a long and tortuous journey for all involved, with eight years of tight supervision by a handful of foreign governments and funds, over the course of three separate bailouts. But unless a major roadblock appears between now and then, August 20 will mark the first day in almost a decade that Greece’s leaders would regain full control over their own spending. The alternative – a continuation of foreign supervision of government accounting that exists today – would be far from politically palatable for Prime Minister Alexis Tsipras as he prepares for national elections next year.

For that to be avoided though, decisions beyond his direct control will need to be taken. For not only must the Greeks themselves show that they have met the dozens of various commitments imposed on them by their creditors (with further progress still required in areas such as the privatisation of state assets, reforms to the energy sector, and rules around property foreclosures), but also Eurozone finance ministers must agree on how the country’s debt load – currently equivalent to 180 per cent of GDP – can be reduced, delayed, or otherwise recalculated.

The Greeks have published their latest economic proposals for a post-bailout world, designed to show markets that they will continue with reform efforts. They intend on building up a cash buffer, drawn from unused bailout funds and their own budgetary surpluses, so that they can weather the whims of the market, and hit their first few repayment deadlines after August.

Time is once again tight to find common ground, and cobble together a solution. But any final deal will be viewed by many across Europe as a proxy for how the continent’s wealthiest nations treat the less fortunate – or indeed less responsible – of the bloc’s members.

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