The Prime Minister held a marathon discussion with the financial staff and the Ministry of Finances yesterday, in preparation for the upcoming negotiations with the troika.
Mr. Samaras called the emergency meeting with Finance Minister Stournaras, Labor Minister Vroutsis and the government’s finances staff that lasted from 18:40 to 23:20. Upon leaving, the PM noted that they discussed three matters; the implementation of the budget, outstanding State debts and preparation for the troika’s arrival.
When asked about the developments in Cyprus, Mr. Samaras commented that “it is too soon to evaluate the impact of the developments in Cyprus. It is certain though that there is generally a negative feeling, but for the whole of Europe”.
The latest estimations suggest that there is a 1-billion-euro shortfall in the implementation of the budget, meaning that the troika might demand further measures. The troika’s visit next week will determine the fate of two loan installments (2.8 and 6 billion respectively). The government hopes to impress the troika, in order to secure the two installments at the upcoming Eurogroup in Ireland and IMF board meeting.
Negotiations
In order to secure the 2.8 billion March installment (which was approved, politically, at December’s Eurogroup), the government was go along with certain reforms. The thorniest issue is reducing the public sector, via a series of voluntary departures, evaluations and other schemes. The government also has to decide upon extending the “emergency” real estate tax it has been collecting through DEI. It seems likely that the tax will be reduced by 20% for 2013.
At the same time though, the government wants to capitalize on the fiscal progress it has made and will attempt to negotiate decreasing taxes (such as the heating tax or VAT on food), as well as coming to an agreement for loan settlements with banks.
