The World Bank – and not the International Monetary Fund – is bringing back to the negotiating table with the country’s creditors the reduction of the income tax-free threshold to 5,000 euros per year in the context of welfare benefit restructuring.
Aiming to save 0.5 percent of Greek gross domestic product from total spending on welfare policies and the universal application of the Social Solidarity Income program within 2017, the World Bank has proposed a reduction of the tax-free threshold, besides the drastic cut in tax exemptions.
At the same time, it sees that there is little scope for intervention on welfare benefits as, it admits, social expenditure in Greece – which came to 2.1 percent of GDP in 2014 against an average of 4 percent in Europe – may well go down further due to the cuts to the low-pension supplement (EKAS) and the expiry of the programs for the combatting of the humanitarian crisis.
Data made available to creditors at technical-level talks with Athens show that this category of expenditure is expected to be cut to just 1.85 percent of GDP this year and to 1.46 percent in 2017. If the creditors insist on a further reduction by another half percentage point, in 2018 it will be at just 0.83 percent of GDP.