MNI EXCLUSIVE: EU Plans Tight Greece Supervision Post Bail-Out

--Further Debt-Relief Measures Conditioned To Enhanced Supervision

--Both Issues Separate, But Set To Merge In April

by Jean Comte

     BRUSSELS (MNI) - The European Union institutions are planning to tie the

next debt-relief measures for Greece to the set-up of an enhanced supervision of

the country's regulatory following the end of the current bail-out program, MNI

has learnt.

     The goal is to ensure that the end of the current economic 'adjustment'

program -- planed for August 2018 -- is not used by Athens as an opportunity to

rollback the structural reforms and budgetary measures set up since the start of

the program in summer 2015.

     "There will be sticks and carrots," said one EU official.

     The current program is made up of a series of loans from the European

Stability Mechanism (ESM), each disbursed after the completion of several

reforms or budgetary actions, following a precise plan agreed in 2015. 

     Once the program has ended, Greece will be out of the 'loans for reforms'

scheme --even if Greece has committed to keep a 3.5% of GDP fiscal surplus and

if a pre-legislated pension reform is set to kick in in 2019.

     Athens has already made clear that it will request the ESM post-program

tool (the 'precautionary credit line'), which only leaves room for a soft

'post-program surveillance' until it has reimbursed 75% of the ESM debt.

     --OPT OUT NOT OPTION

     But EU sources told MNI that Athens opting out of surveillance is not an

option.  "There is a need for some monitoring," said an official from the French

finance ministry. "It will go alongside debt relief measures," he added.

     EU institutions committed in May 2016 to implement debt relief measures

after the end of the ESM program. Actions foreseen include transfer of profits

currently held by the Eurosystem (from the Securities Markets Programme and from

the Agreement on Net Financial Assets) to the ESM to reduce Greek financing

needs.

     The Securities Markets Programme, for example, amount to E5 bilion

according to the initial EU source -- meaning that repatriation of these profits

could easily be segmented into several parts, each linked to precise conditions.

     Eurogroup officials are also working on a so-called 'French mechanism',

which would link interest reimbursements to actual economic growth in the

country. 

     --APRIL TALKS

     Experts are still examining the technical details of the system, but the

implementation could go alongside further conditions. "If there is additional

debt relief, there might be some additional surveillance" Klaus Regling, the ESM

managing director said during a visit to Greece earlier in the month.

     Officials who spoke to MNI stressed that discussions on debt relief are now

separated from talks on post-program supervision. However, both issues are set

to merge in mid-April, when the EU Commission will present a document detailing

all possible options to the Euro Working Group .

     Finance ministers are then expected to discuss the issue at the Eurogroup

meeting planned for the end of April.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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