Greek parliament vote to pave the way for €2bn ESM disbursements

As agreed at last week's Eurogroup meeting, the Greek parliament is expected to pass this week the 49 milestones needed to obtain the second sub-tranche of €2bn of the first tranche of the programme. These measures include implementation of the gas market reform, earlyretirement law for the public sector, tax policy reform, finalisation of regional airport privatisations, and liberalisation of protected professions. 

Hopes of broad-based, crossparty support for the reforms have faded as the two main opposition parties, New Democracy and PASOK, have both expressed their reluctance to vote for the measures.

After the parliamentary vote, a new set of milestones will need to be agreed with the institutions by the end of October in order to be adopted before the end of November. 

"Having already won a vote of confidence, PM Tsipras is likely to get the backing of parliament, though he may lose a couple of MPs' votes from his 155 seat majority (out of 300)", says Societe Generale. 

This would then allow the completion of the first review of the programme and hence the beginning of the discussions on debt re-profiling. Risks remain high, however, of the review being further delayed towards the end of the year. 

Indeed, this new set of milestones is said to be much tougher, with in particular more clarity on the pension reform and the governance of the financial system and an increase in farmers' taxation. On top of that, the 2016 Budget is set to be discussed in parliament, with additional austerity measures likely.

Some of the 49 milestones relate to financial stability (comprehensive strategy for the financial system, household insolvency law reform, strategy to address NPLs issue etc.). The adoption of these milestones will also be determinant for the ongoing discussions on the banks' recapitalisation, which are taking place in parallel. 

"The ECB's Asset Quality Review and stress test to assess the banks' capital needs is expected to be completed by early November, paving the way for banking sector recapitalisation through the bailout fund, including with private sector involvement", states Societe Generale. 

The institutions aim to complete recapitalisation of the banks before the end of the year (most likely leading to further state control, and potential losses fordifferent categories of debtholders or even depositors). Risks of delay are also high.