A 15-month plan for a leaner and more rational public sector

The government is drafting a 15-month plan to streamline the public sector, which will involve the hefty trimming of the extensive powers of the heads of public utilities and organizations, and the abolition of the tax-free status and cuts in the remuneration of highly paid ministry committees and consultants, sources say. The prime minister, Costas Karamanlis, is said to have assigned the drafting and the responsibility for the execution of the plan to two of his most senior ministers, Giorgos Alogoskoufis at Economy and Finance, and Dimitris Sioufas at Development. The successful implementation of the plan is considered crucial by the end of 2006, as the Greek economy must be in a position in 2007 to withstand the gradual, mandated 40 percent rise in fuel taxes by 2010, as agreed by the EU, and in order to afford the promised tax breaks and reduction of the top income tax rate to 25 percent. More specifically, the reform plan in the broad public sector envisages administrative rationalization, cuts in waste, more privatizations and a drive to boost growth. As regards utilities, the economy minister and his responsible overseeing colleague acquire institutional responsibility in their finances, while all will have to adopt the principles of corporate governance and International Financial Reporting Standards. By the year’s end at least, one more state company will put a stake up for sale, with 10 percent of Agricultural Bank’s shares being the favorite. A close second is a 10-percent stake of OTE telecom. In 2006 privatizations will intensify, with the state selling its stake at Emporiki Bank and another 10 percent each from Agricultural Bank and OTE, while the Postal Savings Bank and the Athens International Airport will also be floated. The government is also preparing to submit to Parliament a mini-tax bill in the fall, which will include incentives for taxpayers to declare more expenses. According to the tentative ideas still being considered, taxpayers will be entitled to the tax breaks on condition they have collected receipts for goods and services totaling at least 30 percent of the tax-free ceiling. The new financial crimes squad (YPE) will also be asked to enforce their ability to shut down shops or even major companies for two weeks to three months if needed. Expenses and salary rises will be contained, as the average annual income at state companies is about three times as much as the average salary of Greek economy. Finally, a small rise in fuel taxes, depending on the course of international prices, is not ruled out.

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