Greece’s lenders are in Athens today for talks with the government on wrapping up the third bailout evaluation, and preparing for the fourth and last one, before summer.
The representatives of the ESM, the ECB, the European Commission and the IMF, are expected to discuss the fiscal measures for 2019, including the reduction of the tax-free amount on personal income tax, so as to ensure the target of a 3.5 percent primary surplus.
The government’s position is that all is on track, as the 2017 surplus was a hefty four percent – about nine billion euros – before the social welfare handouts given in December. That is expected to be confirmed by Eurostat in April.
Along with lowering the tax-free ceiling, the government must proceed with agreed pension cuts, and eliminating any VAT discounts on the islands, and all that must be passed into law by May.
By the end of March, the government is required to finish its overhaul of the tax valuations of real estate zones for taxation purposes, to bring them closer in line with commercial values, which are now lower. But the overall revenues from real estate taxes must not be reduced, which may presage a hike in ENFIA real estate taxes in many cases.
Other reforms on the table are the institutional framework for labour relations, and retaining the 5:1 ratio of the withdrawal of civil servants to the hiring of new employees, which must continue under future governments.
The other key issue in talks with creditors is debt relief, and what form that will take.
As the managing director of the European Security Mechanism (ESM), Klaus Regling, said on 23 February, “The technical work has already commenced to determine if debt relief will be required for the Greek national debt, after the completion of the fiscal adjustment programme, so that we can be ready by the end of the programme in the summer.”
Sources told To Vima that the Eurogroup Working Group on 1 March will discuss a package of debt relief measures. It will entail a period of stable payment of 3.5 percent of GDP annually over at least 15 years, which is essentially a grace period to limit the country’s borrowing needs.
The second prong is buying up, with the remaining 30 bn euros in ESM funding to which Athens is still entitled, the IMF’s loans to Greece with a 3.5 percent interest rate from 2010-2011, and paying off inter-state loans to Greece from the first bailout memorandum. All this will go forward without the national debt being burdened any further.
If all goes according to plan, 18.4 billion euros will be disbursed to Greece by summer, to create a cushion that will allow Athens to return successfully to the markets, and pay back 4.8 bn euros in arrears that the state owes the private sector, offering a crucial push to the economy.