Athens: For Greece, 2018 is a crucial year.

The key question in the months ahead for what was once the epicentre of the European credit crisis is: Will it turn the corner and wean itself of external aid like Ireland, Portugal and Cyprus — something the Greek government wants? Or, will the current bailout program, which ends August 20, be followed by a similar arrangement — as some observers expect?

“Things are looking better for Greece, having regained access to markets and with the recovery gathering speed,” Fabio Balboni, European Economist at HSBC Bank Plc in London, said in a January 4 note to clients. “In 2018, the country might finally exit its bailout program, but a clean exit might prove challenging if the Eurozone fails to deliver substantial and credible debt relief.”

Since 2010, Greece has had three lifelines from Euro-area countries and the International Monetary Fund with stringent conditions in terms of fiscal consolidation and structural reforms. It has also gone through two debt restructurings. In the next six-to-eight months, the Greek government and the country’s creditors have to work through some thorny issues if they want to avert yet another bailout program.

Exiting the bailout without any follow-up arrangement would create an annoyance for the country’s financial sector: it would mean junk-rated Greek banks won’t be eligible for a waiver allowing them to pledge sub-investment grade sovereign assets as collateral for the ECB’s normal refinancing operations, which provide the country’s lenders with around €13 billion (Dh57 billion) in liquidity. This means that once Greece is no longer in a bailout program banks would have to convert some of that into Emergency Liquidity Assistance, which carries a 150-basis-point penalty over regular credit lines.

Tough sells

Greek Prime Minister Alexis Tsipras’s administration will have to fulfil a politically difficult privatisation program as it seeks to boost growth and gain the trust of investors needed for a bailout exit.

The Greek government projects that in 2018 it will manage to get €2.73 billion from the sale of state assets. But creditor estimates are more conservative and see the government falling short of its expectations. The country’s lenders are going to pressure the government to implement what has been agreed and bring in the projected revenues.

By June 2018, the government has to launch the tender for the sale of 17 per cent of Public Power Corp., or find some other way to monetise its stake in the utility. By the end of the first quarter, it has to do the same for the sale of 30 per cent of Athens International Airport, 65 per cent of Greek state-controlled natural gas supplier Depa, 5 per cent of Hellenic Telecommunications Organization SA and 35.5 per cent of Hellenic Petroleum SA Greek authorities will have to complete by February 2018 key conditions needed for the start of the Hellinikon project.

Failure to meet targets may jeopardise government efforts to seek additional debt relief, as creditors will demand that the government does its part for lightening its burden before agreeing to additional concessions. “What Greece has to do is stay on top of the reforms and if it does that, it creates space for the European Commission and the Eurogroup to discuss the big questions,” Mujtaba Rahman, managing director at Eurasia Group in London said.