The Greek government on Tuesday reportedly tabled a “compromise” with institutional creditors in order to avoid legislating a 3.6-billion-euro “contingency package”, promising to instead submit a draft bill that mandates automatic, but unspecified, spending cuts in case Eurostat figures in the spring of 2017 and 2018 don’t show the country meeting primary budget surplus targets.
The proposal, according to press reports in Athens, would allow the finance minister at the time to make automatic spending cuts in order to reach the 1.75 and 3.5 percent primary budget surplus goals, as a percentage of GDP, respectively.
In a bid to add “teeth” to such a legislative act, and, more importantly, persuade lenders, the leftist government will reportedly speficy penalties against the relevant finance minister in case extra measures are not taken to meet targets. However, the same reports claim that the Greek side will give itself “leeway” in allowing for more tax measures to be taken, and not exclusively spending cuts, which in essence mean public sector wage and pension cuts.
The Tsipras government’s proposal aims tp avoid the political “hot potato” of not only detailing measures in a contingency package but having to pass the measures through the Parliament process.
Political and economic uncertainty resurfaced in Greece over the recent period due to the inability to achieve a first review of the Greek program (third bailout), which would free up lenders’ financing, as well as the ongoing Mideast refugee crisis that has plagued the country more than any other EU member-state for the past year and a half.
The wording of the proposal, according to sources, would be something along the lines of “…(Greek) authorities are committed to taking additional structural measures (a date of October 2016 is cited), if the latter are deemed necessary, in order to meet 2017 and 2018 targets. Such measures will include defence spending (cuts), a planned reform of the individual income tax regime (tax hikes on income) and a freeze of non-elastic expenditures.”
