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The Troika has decided to return to Athens on Monday, 4 November (instead of 28 October) and during these 10 days Greece should set its line for negotiations, the main topic of which will be the financial gap in 2014 and the measures that will be needed in order to overcome it. There are two major suggestions, one of which is "no more measures" - at least at the moment and the other one provides for small, but targeted, cuts.

1. The additional budget

The first scenario implies that Athens will insist that further measures are not necessary, according to Greek estimates. This year, the recession will decrease compared to estimates given by the Troika and, moreover, financial results will be better than what has been agreed with representatives of creditors. The Treasury has estimated that the primary surplus will eventually surpass 1 billion euro instead of the 344 million euro recorded in the preliminary draft budget.

Thus, Greece could argue that since 2014 will start from a better macroeconomic and financial basis, the goal of a primary surplus amounting to 1.5% of GDP will definitely be achieved. At the same time, the government has promised that if estimates are not confirmed by April-May, adjustment measures will be taken via an additional budget, similar to what happened in 2012. If negotiations for a debt relief have started by that time, Greece may also request a change of financial goals.

2. Measures amounting to 500 million euro

The second scenario implies that Greece will admit that it has a budget shortfall of up to 500 million euro and will propose appropriate measures. Yiannis Stournaras who made the proposal, believes that this may be an acceptable compromise for both sides. Gaps in the social security system may be covered by measures aimed at the improvement of collection of contributions that are proposed by Minister of Employment Yiannis Vroutsis and cuts in early retirement.

The two proposals are not necessarily independent of each other. During the negotiations, both the first and the second defence line may be used. If the Troika rejects the suggestion of no more measures, the second scenario may be considered. But it seems that this is the last thing Athens will accept.

However, both scenarios are far from what the Troika asked for in the previous round of negotiations. Representatives of creditors have doubts about additional revenues which are provided by the draft budget and which will come from the improvement of the efficiency of tax administration and the automatic increase in revenues because of the recovery.

Greece has attracted studies of the IMF and the Organisation for Economic Cooperation and Development, which show that the acceleration of the growth rate by one percentage improves financial performance by half a per cent. This means that after the economy has moved from a 4% recession in 2013 to 0.5% growth in 2014, the primary surplus will exceed the target, which happened this year. "It is illogical that the Troika argues that the fiscal deficit is 1.5% of GDP," said a representative of the economic team.

Creditors

In turn, representatives of the European Commission are facing Athens’s refusal regarding new measures as a communication tactic in which, however, the government risks being captured. They also think that it was wrong to declare hastily a distribution of the 2013 surplus, since if it is really achieved, it will be small and moreover, it will not be permanent. In other words, the fact that the 2013 surplus will be higher than the target of 344 million euro does not mean that the same thing will happen next year. Therefore, the relief measures that will be taken will be extraordinary. The third mistake, according to them, is that this is a topic of political negotiations.

Besides false messages from Greece that bother northern European capital cities, the most important thing is that there are real problems that need to be addressed. For example, revenues from contributions to the social security fund IKA from July to October are lagging behind by 300 million euro. The implementation of tax collection is improving, but revenues still do not meet objectives. Therefore, Athens will have to make reliable estimates of its budget deficit and provide reliable measures in order to address it, say the representatives of creditors.