July is critical for the Finance Ministry
Newly appointed Finance Minister Evangelos Venizelos needs to hit the ground running despite the difficulties posed by the midterm austerity agreement. By mid-July, the Finance Ministry will need to have hammered out a blueprint for three significant draft laws, major changes to taxation and streamlining state expenditures by downsizing the public sector and privatizing state-owned enterprises.
Venizelos succeeded in passing the midterm austerity agreement through Parliament, but that was easy compared to what lies ahead when it comes to actually applying the terms of the agreement.
Political turmoil, the cabinet reshuffle and the tense votes on the reform package in Parliament meant a two-week lull in operations at the Finance Ministry, but now it needs to get back into gear to meet the following challenges:
1. Getting parliamentary approval for an across-the-board salary structure for the civil service. The first step in this direction is freezing all pay rises and promotions from July 1, which is part of the midterm agreement. This measure is aimed at saving the state 1-1.5 billion euros by 2014. The new salary structure foresees very low minimum wages (at the level of the private sector) and sweeping cutbacks in benefits (based on employees? years of service and experience). The new terms will apply immediately for all new hirings, while the changes will affect existing employees over a three- or five-year period, based on the magnitude of the cuts they will experience. The changes will also be applicable to all employees at state-owned companies.
2. The Privatization Fund must be up and running within the next 20 days at most. The opposition New Democracy party voted in favor of its creation and now the government and the opposition parties need to find the people who will run and staff it in joint agreement. The first state assets on the list are state-owned enterprises, among which are the Athens and Thessaloniki water and sewerage companies, state betting agency OPAP, Public Power Corporation and the port authorities of Piraeus and Thessaloniki. The next phase will concern the development of real estate assets.
The creation of the Privatization Fund is thorny for three reasons: Firstly because the government and the opposition need to agree on the people who will run it; secondly, because the privatization drive is expected to provoke instant and forceful reactions from the labor unions concerned; and thirdly, the fund needs to be put into operation as soon as possible to begin generating revenues that are one of the key elements of the Greek rescue deal.
3. The ministries of Finance and the Environment need to pass legislation that will allow the owners of illegally built homes to pay a fine that will protect their properties from demolition by the end of this month, in order to bring in the 600 million euros the government estimates will come from this measure.
Beyond these three major legislative hurdles, the Finance Ministry also needs to address the issue of overhauling the tax system. The immediate aim is to slash red tape and then to bring about a reduction in taxes on businesses and in value-added tax, as well as to introduce measures to curb tax evasion. On this latter issue, the ministry is exploring the possibility of handing over the task of tax collection to private auditors and tax offices.
It is also likely that the ministry will be submitting a draft law to Parliament by the end of the month regarding the abolition of 40 small public sector bodies and the merger of 25, as well as the full closure or privatization of another 10 that employee 7,000 workers.
As far as the privatization of state-owned enterprises is concerned, there will be a review of plans concerning the restructuring of the Hellenic Railways Organization and the OASA urban bus company, while every business has been asked to submit a plan for cutting its expenses by 10 percent.
