New troika deal sets Greece range of targets but no immediate austerity measures
By Sotiris Nikas
A new agreement drawn up by Greece and its lenders foresees that Greece will return to bond markets this year and will not have to take any new austerity measures this year beyond those needed to make up for the reversal of previous cuts ordered by courts.
However, the agreement, which was drafted on March 28 and has been seen by Kathimerini, sets out a range of commitments that the Greek government has to stick to over the months to come.
Here are the 12 key points in the new memorandum:
1. Public expenditure should be frozen at the same level as 2013.
2. No new austerity measures will be needed but the Greek government is obliged to fill any fiscal gaps that emerge as a result of court decisions that reverse previous wage, or other, reductions.
3. The fiscal gap for 2015 is seen at 1.1 percent of GDP (2.1 billion euros) and the government will have to set out this autumn in the budget for next year the measures it plans to take to cover this shortfall. The troika foresees a fiscal gap of 3.9 billion euros in 2016 and 2.2 billion in 2017.
4. If fiscal reforms, such as improvements in the tax administration, fail to deliver the desired results, the government will have to make further spending cuts.
5. The adoption of a new set of reforms along the lines of the liberalization measures recommended by the Organization for Economic Cooperation and Development (OECD). These reforms will focus on the wholesale, telecommunications, e-commerce and processing sectors.
6. If the change to rules on mass dismissals does not have the effects Greece’s lenders are expecting, then the government will have to pass a new law this autumn that will bring regulations in line with the EU norms.
7. The government will have to legislate by January 1, 2015 an exemption from VAT for small businesses. Also, by 2017, the government will have to bring taxable property values in line with market prices. The unified property tax will be paid in six installments, with the first being due in June.
8. The government, which paid off 6 billion euros of state arrears in 2013 rather than the 8 billion it pledged, will have to pay off the 2 billion leftover by the third quarter of 2015. The troika also foresees that another 2.5 billion euros of new state arrears will emerge by the end of this year.
9. The government will have to carry out a new viability study for Greece’s social security system. Greece’s lenders are also demanding the merging of all civil service auxiliary pension funds with the private sector fund ETEA.
10. A new public sector wage structure will be created and will be linked to staff evaluations.
11. Greece will have to maintain large primary surpluses to make its debt more sustainable. According to the troika’s baseline scenario, Greek public debt is expected to fall to 125 percent of GDP by 2020 and 112 percent by 2022.
12. The troika has also asked for privatizations to be speeded up. Revenues from sell-offs this year are seen reaching 1.5 billion euros. The target for 2020 is for Greece to raise a total of 22.6 billion euros from the sale of state-owned assets.