Approval Of Mou İn Greek Parliament Positive, But İmplementation Risky: Moody's

The approval of the conditions of the new credit package of Greece with its creditors in the parliament on August 14 is a positive development, while the implementation could be highly difficult regarding political risks, urged the international ratings company Moody's on Monday.

On August 14, the Greek parliament has approved a "memorandum of understanding (MoU)" between the government and its official creditors in respect to the terms of a third credit package. Within the poll, some 222 of 300 MPs in the Greek parliament have said "yes" to the controversial credit package, while the vote support has fell to 118 among 162 coalition members due to 43 "rebels" within ruling Syriza party who have voted against or abstained, which led to a tension. The number is below the 120 minimum that is considered acceptable for a minority government.

"The vote is credit positive because it opens the door to a political agreement that can alleviate short-term liquidity pressures ahead of a crucial €3.4 billion repayment (consisting of amortization and interest) to the European Central Bank due Thursday, 20 August. However, because of the politically contentious requirements attached to the third bailout package, implementation risks will remain very high for the duration of the programme period until 2018" said Moody's statement.

The "political risks" within the statement referred to media reports suggesting a call for vote of confidence in the coming days by the PM, in which a failure of a confidence vote would oblige early elections that could create political uncertainty and implementation risks.

Regarding the Eurogroup meeting on Aug. 14, Moody's reminded that although Finland has approved the package Germany has voiced concerns about the MoU, which could delay approval of programme and the disbursement of funds.

"This uncertainty is compounded by Greek institutions' limited capacity to implement reforms, and the significant social and political opposition to the bailout conditions" said Moody's statement, urging the success of this third bailout package is far from certain due to liquidity risk. - Istanbul