“There Was White Smoke”: Greece Reaches Deal With Lenders, Promising Even More Austerity

Greek government bond yields fell after Greece and its lenders said they reached a long-awaited deal on reforms required to release further bailout funds. With a promise to further cut pensions and give taxpayers fewer breaks, Greece paved the way for the disbursement of further rescue funds from international lenders and possibly opened the door to reworking its massive debt Reuters reported.
The deal was reached early on Tuesday morning, when officials from both sides said they had agreed on a package of bailout-mandated reforms, ending six months of staff-level haggling. Greek Finance Minister Euclid Tsakalotos announced it with a term associated with papal elections. “There was white smoke,” he told reporters.
As part of the reforms, Athens has promised to cut pensions in 2019 and cut the tax-free threshold in 2020 to produce savings worth 2 percent of gross domestic product. If Greece outperforms targets, it will be allowed to activate a set of measures offsetting the impact of the additional austerity, which includes mainly lowering taxes. Athens also agreed to sell coal-fired plants and coal mines equal to about 40% of its dominant power utility Public Power Corp’s capacity.
On the budgetary target level, the lenders are now likely to decide among themselves on Greece’s medium-term primary surplus targets, a key element for granting further debt relief.

This post was published at Zero Hedge on May 2, 2017.