Prime Minister George Papandreou is to present Greece’s midterm fiscal plan and its privatization program to the head of the Eurogroup, Jean-Claude Juncker, in Luxembourg on Friday as he hopes to secure not only the June installment of the country’s loan package but the extra funding that will cover an 85-billion-euro gap in public finances over the next three years.
However, the plan that Papandreou is to present will include extra taxes for salaried professionals and pensioners.
Papandreou is expected to provide Juncker with details about his government’s fiscal plan, which will aim to raise or save an extra 28 billion euros by 2015. He will also set out Athens’s plans for selling off state assets. Sources said that the privatizations of state gambling firm OPAP, the Athens Water and Sewage Company and Athens International Airport are to be bumped up to this year in a bid to convince Greece’s eurozone partners that it is taking the program seriously.
Papandreou will also reveal how a new independent agency will oversee the sell-offs.
Final approval is due to come from the Eurogroup meeting on June 20 and any details will be finalized at a European Union leaders’ summit on June 24 that will also pave the way for Greece to enter a new three-year loan pact.
Representatives of the EU and International Monetary Fund are expected to wrap up on Friday their inspection of Greece’s public finances and issue a statement saying that approval of further funding for Greece is a prerequisite for the 12-billion-euro June tranche of its loan deal to be dispensed.
Not all the extra funding will come in the form of loans, sources said. The EU and IMF will provide 30-40 billion euros of financing but privatizations are expected to bring in 25 billion euros and about 20 billion euros will come from a voluntary debt reprofiling. Some private investors are expected to accept swapping their Greek bond with new 10- or 15-year notes. The reprofiling will be handled in such a manner as to avoid triggering credit default swaps, sources said.
Meanwhile, the midterm fiscal plan is expected to hit salaried workers and pensioners as the tax-free threshold will be reduced from 12,000 to 10,000 or 8,000. For self-employed professionals, it will go down to 6,000. Also, restaurants and tavernas will have to charge 23 percent value-added tax rather than 13 percent. This measure will be brought in after the summer. Further taxes on natural gas, heating oil, tobacco and soft drinks are also on the cards.