Tuesday's early morning agreement between Athens and its institutional creditors featured at least two measures that will continue to bruise the already beleaguered Tsipras government's support from its more leftist and populist supporters, namely, further cuts on supplementary pensions and a liberalization of Sunday store hours.
The agreement, described as "preliminary" before an actual staff-level agreement is presented to Eurozone finance ministers in the Eurogroup setting, comes after months of on-again, off-again negotiations to conclude a second review of the Greek program (third bailout).
All eyes are now on creditors and their volition to extend debt relief measures desperately desired by a leftist-rightist Greek government sinking in the opinion polls, as well as the IMF, which continues to demand specific measures to ensure that the Greek debt is sustainable. This would satisfy the IMF's charter and would, ostensibly, allow the Fund to return to the Greek program as a lender.
The other much-coveted goal of the Tsipras government is the re-inclusion of Greek bonds in the ECB's Quantitative Easing (QE) stimulus program, nearly two years after the ECB excluded the country's bonds from the program amid the absolutely fruitless negotiations in the first half of 2015.
In terms of the IMF's involvement, a G7 summit between May 11 and May 13 in Bari, Italy is expected to serve as the venue for further talks on the Greek program.
Specifically, the measures finalized on Tuesday include:
- A reduction of the tax-free annual income threshold from 8,636 euros to 5,681 euros, which means an expanded tax base downwards, i.e. one to include more taxpayers on the lower end of the incomes scale that previously paid no annual income taxes.
- The sale of roughly 40 percent of the state-controlled power company's (PPC) lignite-fired units and accompanying lignite pits. The latter demand is aligned with the Commission's standing policy of breaking up dominant power companies in EU countries - usually former state monopolies - in order to boost competition and reduce rates.
- A further change in the framework for auctioning off future power production (the NOME process) towards continued liberalization
- Dealing with consumers' mounting arrears to the Greek power company, a trend that risks bankrupting the once-robust Greek utility.
- A further deregulation and liberalization of the natural gas sector in Greece.
- A withdrawal of the state-run natural gas supplier (DEPA) from regional natgas subsidiaries.
- The sell-off of a 66-percent stake of the Hellenic Gas Transmission System Operator (DESFA), a would-be privatization that was scrapped last year after an Azeri-led consortium withdrew its interest.
- Completion of the sale of 24 percent of the Independent Power Transmission Operator (ADMIE) to China's State Grid Corp.
- Benchmarks for increasing the use of generic drugs
- Fixed budgets for each health care category
- Continued monitoring of public sector-affiliated physicians' rates of drug subscriptions
- The all-important measure of allowing non-subscription drugs and medicines to be sold outside pharmacies, a long-standing demand by free-market proponents in the country and one of the more prominent recommendations in the OECD's so-called "tool box" for Greece.
- A double cut in many beneficiaries' supplementary and primary pensions, up to 18 percent on roughly 900,000 pensioners
- An average reduction of affected primary pension rates to the tune of 9 percent.
Conversely, countervailing measures that will be implemented only if the government at the time (2019 and 2020) meets fiscal targets include:
- A reduction in the corporate tax rate from 29 percent today, to 26 percent in 2019. The current rate emerged from last year's "tax tsunami" imposed by the Tsipras government and passed by a slim Parliament majority.
- A hoped for reduction in the primary personal income tax rate of 22 percent to 20 percent 2019, as the former was also imposed in 2016 by the current government.
- A progressive reduction in the so-called "solidarity contribution", essentially another income tax slapped on medium- to high-income, by Greek standards, taxpayers.
- A reduction, by 180 million euros annually, in the property tax imposed and collected by the central government. This unpopular tax was one of a bevy of tax burdens that the ruling SYRIZA party and its rightist-populist junior partner, the AN.EL party, promised to fully abolished before they assumed power in January 2015.
- A rent subsidy of up to 1,000 euros a year for what the government calculates as 600,000 families, along with assorted other welfare spending hikes for measures ranging from school lunches to more child care centers to even a promise for 200,000 new jobs by allocating 260 million euros in employment-making schemes.
