Sensitive negotiations continued this week between the Tsipras government's top ministers and representatives of institutional creditors, with the Greek side insinuating during the course of the week that it will not acquiesce to any further spending cuts.
The “unofficial” reports came in light of a revision, downwards, of Greek GDP for 2015 and the primary budget surplus for the preceding year as well, two developments that alter the “calculus” negatively vis-à-vis Greece's forthcoming fiscal targets.
Additionally, creditors’ representatives appear unconvinced of the leftist Greek government’s recent proposals on defense cuts, changes in special public sector salary scales (physicians, military officers, judges etc) and prospective funding for a minimum guaranteed income.
Another so-called “red line” for the Greek government is a further reduction in the tax-free annual income ceiling for individual taxpayers, a standing demand by the IMF. The latter considers the current ceiling, of roughly 8,500 euros per annum, as leaving a major portion of the tax base exploited, and especially in light of the fact several categories of self-employed professionals, such as craftsmen, often peg their income tax statements at or below the tax-free threshold.
Another pending issue is the submission of the medium-term fiscal adaptation strategy for the 2016-2020 period, which is particularly important, as far as the "quartet" of creditors are concerned, given that fiscal targets will be delineated for 2019 and 2020, the two years after the current -- and third -- bailout program ends.
