Bailout talks heading for break

Bailout talks heading for break

Sunday’s meeting in Athens between Greek ministers and the country’s lenders was expected to be the last before the Catholic Easter holiday next weekend, leaving the various parties with substantial ground to cover after the break.

Some of the institutions’ technical staff had already started to leave Greece on Saturday and it is thought that the last representatives from the four creditors will be gone by Sunday.

The break comes after some progress was made in bridging differences over tax reform and pensions cuts but with Athens and the quadriga remaining some distance apart on the sale of nonperforming loans (NPLs).

However, the mood appeared to sour when Finance Ministry sources accused the International Monetary Fund of inexplicably asking for the tax-free threshold to apply to higher incomes. Two officials involved in the talks, speaking on condition of anonymity, told the Financial Times that Greek Finance Minister Euclid Tsakalotos threatened to move the talks with the IMF to the village of Idomeni in northern Greece, where thousands of refugees are stuck due to the border being closed.

Despite this apparent friction, it appears that an agreement on tax reforms is fairly close and that Greece and its lenders have edged closer on the overhaul of the pension system. The issue of liberalization of the NPL market will have to be revisited thoroughly after the pause for Easter.

On the changes to taxation, the Greek side has accepted the lenders’ call to reduce the tax-free threshold from 9,550 euros to 9,100. The IMF had proposed that it drop as low as 7,000 euros. It also suggested that the tax break apply to incomes above 42,000 euros, for which it is not applicable at the moment.

The coalition has also proposed five income tax brackets, which would leave those earning between 25,000 and 55,000 euros paying slightly less and those making more than 65,000 a year paying substantially more.

Athens also suggested changes to the ENFIA property tax and an increase in the special consumption tax on fuel and natural gas to meet fiscal targets.

It is likely that the lenders’ representatives will return to Athens at the beginning of April, with the aim of reaching an agreement with Greece in time for the Eurogroup on April 22.

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