List of Economic Overhauls Greece Must Flesh Out by MondayMarcus Bensasson
Greek government officials plan to hold talks in Brussels over the weekend with representatives of the country’s creditors to put the finishing touches on an economic overhaul plan the government hopes to finalize by Monday.
The proposed reforms will bring in 3 billion euros ($3.3 billion) of additional revenue this year and allow Greece to achieve a primary budget surplus of 1.5 percent of gross domestic product, according to a Greek government official who asked not to be identified in line with policy. The plan sees GDP growing 1.4 percent this year, he said.
Under Greece’s 240 billion euro bailout program with the euro area and the International Monetary Fund, the country was supposed to post a primary surplus of 3 percent of GDP this year. A Feb. 20 agreement to extend the bailout until the end of June says “economic circumstances in 2015 will be taken into account” when assessing this year’s primary surplus.
The commitments, included in a Feb. 23 letter the government sent to creditors, cover four main areas:
Prime Minister Alexis Tsipras must show how he will turn general commitments like “creating a new culture of tax compliance” and modernizing payment procedures into a plan of action.
Commitments include streamlining sales-tax rates, with a view to limiting exemptions, implementing a comprehensive review of government spending in every sector, devising a strategy for dealing with tax arrears, overhauling health expenditure, tightening legislation on funding of political parties, social security reform and fighting corruption.
A partial list of the reform measures this month focused heavily on this area. That proposal, which included hiring non-professional tax inspectors such as tourists, was deemed inadequate by Greece’s creditors.
The government promises to deal with non-performing loans “in a manner that considers fully the banks’ capitalization.” Planned legislation to protect primary residences from foreclosure that the government will submit to parliament next week may draw attention from the European Central Bank, which is the banks’ regulator and is already shoring up their liquidity position with more than 100 billion euros of lending.
The government also passed legislation last week for the repayment of tax arrears under an installment scheme, potentially creating a rift with creditors who hadn’t agreed to it.
Greek commitments include pledges to remove barriers to competition, cut red tape for business, finalize a land registry, reform the judicial system and lift “disproportionate and unjustified restrictions” in regulated professions.
The government has also committed not to roll back planned or completed privatizations though it says it will review those that haven’t begun. Under the existing bailout, Greece was due to raise more than 2 billion euros from state asset sales this year and a total of 22 billion euros through 2022.
Labor reform measures could be a flashpoint. In the Feb. 23 letter, the government scaled down initial plans to raise the minimum wage by committing that the “scope and timing of changes to the minimum wage will be made in consultation with social partners and European and international institutions.”
This was a key plank of the platform that got Tsipras’s Syriza party elected on Jan. 25, and includes measures to subsidize electricity, food and housing for poor households. The government passed those into law last week, opening another rift with its creditors, who complained they weren’t properly consulted.