The Greek government’s plan to cover projected fiscal gaps for the 2017-18 period is expected to be presented at Friday’s Euroworking Group teleconference, with measures to immediately generate an additional 1.8 billion euros of revenue on the table.
By Nikos Bellos & Thanos Tsiros
The Greek government’s plan to cover projected fiscal gaps for the 2017-18 period is expected to be presented at Friday’s Euroworking Group teleconference, with measures to immediately generate an additional 1.8 billion euros of revenue on the table.
Four main "open issues" remain, however, and must be addressed by the Greek side in the coming days, as a deadline of April 22 to close negotiations for a first – and delayed – review of the Greek program (third bailout) looms. Greek ministers and representatives of creditors – mainly the Commission – have repeatedly pointed to the specific date.
First off, Athens and its institutional creditors (Commission, ECB, ESM, IMF) must decide on whether extra measures, mostly tax hikes of all categories and varieties, will reach 3 percent of GDP or if the IMF will remain steadfast in its position that a greater figure is necessary. Even the 3 percent figure, which translates into 5.4 billion euros, is considered a feat for the current leftist government, given that several direct and indirect taxes will be raised, while pension cuts may be needed as well to meet the agreed target.
The still unresolved issue of non-performing loans is also an obstacle to the first review. One possible, but temporary compromise, would be to delay resolution in order to achieve the first review and allow other measures to be implemented.
The leftist Greek government wants a “laundry list” of exceptions to the sale and management of NPLs by foreign funds, while creditors want a more comprehensive liberalization of the sector and a sizable reduction in the euro figure for NPLs, which is now calculated at a whopping 80 billion euros for a country of 11 million residents.
Another difference is over tax scales, with Athens proposing rates of between 22 and 45 percent, the latter on incomes of 40,000 euros and more. The IMF has demanded an expansion of the tax base downwards, as well as cuts in tax breaks for mid-to-lower income brackets. According to reports, European creditors have accepted the Greek side’s proposals.
Finally, creditors must decide if they accept the Greek government’s proposal to increase monthly social security contributions paid by working people and their employers in order to safeguard the pensions of retired people. Here, too, the IMF is reportedly weary of the data supplied by the Greek side and apparently insists on greater cuts in the coefficients for determining recoupment of pension rates.