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Early tax discount cut is increasingly likely

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The International Monetary Fund is expected to insist on Greece bringing the reduction of the tax discount forward to January 2019, as on Thursday IMF spokesman Gerry Rice did not rule out the possibility that the Fund could demand the income tax-free threshold be lowered a year earlier. He also struck a note of optimism about the IMF’s participation in the Greek program.

The current plan for the reduction of the tax discount is for it to apply from 2020, but the IMF is increasingly likely to call for the measure to be introduced a year earlier on the grounds that, otherwise, the primary budget surplus of 3.5 percent of gross domestic product will not be attained. That would mean a double blow for Greeks from next January, when pensions issued before 2016 are also set to be slashed.

“The discussion with the Europeans and the Greeks on the fiscal figures of 2019 will take place in the coming months, as the agreed timetable provides for,” said Rice, pointing to the bailout agreement that dictates the decision be made in May.

In the last few weeks European sources have been saying that the IMF is insisting on its position for the simultaneous reduction of the tax-free threshold and pensions in 2019 if the primary surplus target is to be met.

The European Commission has made it clear it does not agree with that assessment, and Economic Affairs Commissioner Pierre Moscovici expressed hope that the Fund will bring its estimates down to a more realistic level.

Rice avoided extending the clash with the Europeans, saying relations between the two sides are perfect. He also avoided saying that the Greek program has been successful, commenting only that the crisis in Greece was unprecedented, that the efforts made are commendable and plenty of progress has been recorded. He added that “it is important that the effort goes on.”

The Fund’s spokesman repeated the lender’s desire to participate in the Greek program and said that “the technical work and the discussions have intensified and we are hoping for a positive outcome.”

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