ECONOMY

Gov’t readying to battle negative economic climate

The government is preparing to launch a multitiered action plan for the economy, to be implemented in the next nine months, with a view to meeting urgent public spending requirements, but also to minimizing discontent ahead of the next election and improving the business climate, sources say. The plan would include an extension of the policy of part-flotation of public enterprises, a reform of the investment incentives law and simplification of the taxation system for enterprises. The flotation of a 25 percent stake in the football pools and gaming firm OPAP, mainly to Greek and foreign institutionals, is expected to be announced next month. It is likely to be followed by 20 percent of the Public Power Corporation (PPC) – bringing its total to around 35 percent – and 20 percent of Hellenic Tourism Properties and the Piraeus Port Authority. The government still appears undecided as regards the extent of a part-flotation of the National Bank of Greece (NBG) for which the options are said to be a 10 percent stake or the entire estimated 20 percent which still remains in the government’s possession. The sell-off of public assets is seen as inescapable in view of the government’s urgent requirements with respect to the civil servants’ payroll, pensions and benefits, and the shortfall in public revenues from the budget targets so far this year. The sale of the remaining public interest in NBG could bring anything between 750 and 900 million euros into the government’s coffers, depending on the state of the stock market. The issue is expected to be decided around October or November, but a negative factor is that the public stock flotations expected to precede NBG are likely to soak up large amounts of available liquidity and pull bourse valuations down. In view of the fiscal constraints, the plan, estimated to muster a total of about 2 to 3 billion euros, is seen as an important part of the government’s efforts to battle a widespread feeling of economic insecurity before the next election, due in April at the latest. Such a drive would include benefits to lower income strata and tax breaks for small and medium-sized enterprises (SMEs). Meanwhile, sources say the Finance Ministry is about to table a draft bill in Parliament, reforming the investment incentives law to bring it in line with EU requirements. It will include provisions allowing enterprises to channel up to 40 percent of profits into a tax-free reserve for investment, increasing investment subsidies to SMEs by up to 5 percent, as well as subsidies for new jobs. The bill is also said to provide for the abolition of incentives for relocation to other, low-cost Balkan countries, making foreign investment more attractive and for further incentives for sectors that are facing a downturn, such as textiles. A second draft bill, to be unveiled shortly, reportedly makes tax inspection and calculation procedures in firms and personal businesses more objective, with the aim of improving the image of tax authorities and lessening disputes with taxpayers. Among other things, fines for omissions or minor violations will be replaced by points possibly subject to fuller probing.