By Giorgos Kouros
Upwards of three billion euros of additional measures are apparently the latest result of hasty negotiations between the Greek government and institutional creditors, with press reports pointing to talks on the margins of an IMF meeting in Washington as leading to a “compromise” whereby Athens will implement more taxes and spending cuts in order to meet a 3.5-percent of GDP primary budget surplus for 2018 if current measures don't suffice.
The “reserve package”, if deemed necessary, would raise the overall level of tax and spending cuts – mostly on supplementary pensions – to nine billion euros, up from the most recent figure of 5.4 billion euros.
If finalized this week in restarted negotiations in Athens then the entire package, including the “fail clause”, would head to Greek parliament for approval, where the government coalition enjoys a slim majority of 153 deputies out of the legislature’s 300. The passage of the specific draft bill, or possibly two draft bills, means that the target for a first review of the Greek program (third bailout) would be met this month. Otherwise, a May agreement could delay Athens’ borrowing from its institutional creditors.
The government’s narrative over the recent period has revolved around the idea of promptly achieving the first review, beginning talks over possible debt relief, boosting economic growth and implementing the measures in such a manner that the “fail clause” extra measures will not be activated.
According to reports, however, talks have already begun at the technical level over which measures would be included in the “fail clause”, with proposals reportedly pointing to a reduction in the tax-free income tax ceiling to 8,160 euros, which would expand the tax base downwards; slapping a higher VAT rate on utility bills; eliminating the lower VAT rate of 6 percent for most goods; possible cuts to primary pensions; freeing up mass layoffs; salary cuts in the public sector and a freeze on hiring in the public sector.
