Review by Christos T. Panagopoulos
A meeting of key cabinet ministers is to take place on Monday at the finance ministry, ahead of the arrival in Athens later the same day of the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) troika for the resumption of negotiations with the Greek government.
Those attending the noon meeting with the government’s economic team will include the new ministers joining the cabinet after last week’s reshuffle that will deal directly with the troika. They include: Administrative Reform and e-Governance Minister Kyriakos Mitsotakis, Interior Minister Yiannis Mihelakis, Health Minister Adonis Georgiadis and the two deputy health ministers, Antonis Bezas and Zeta Makri. A meeting between Finance Minister Yannis Stournaras and troika representatives will follow at 5:00 p.m. and troika members will then meet Mitsotakis at 7:30 p.m. in the evening.
The key issue in the new round of negotiations will be that of the 12,500 public-sector employees that are due to be suspended from duty on lower pay (pending a possible transfer if a vacancy arises), since this has already been linked to the 2.8-billion-euro loan tranche already disbursed. Also high on the troika’s agenda are the actions needed to plug a budget ‘hole’ at Greece’s National Health Service provider EOPYY, which is largely responsible for a new fiscal ‘gap’ in 2013-2014. Prior to last week’s reshuffle, a special troika team had been set up at the health ministry to examine equivalent measures proposed by the Greek side to compensate for the shortfall.
With regard to taxation, the heads of the troika mission continue to dispute the effectiveness of the single property tax due to go into effect from 2014, arguing that the system is too complex and that tax offices will be unable to collect, and want the previous system with collection of taxes via electricity bills to continue.
In addition, they are asking that the installments for payment of the Emergency Special Property Surtax be reduced from five to four in 2013. If the five installments remain, the last will be collected in March 2014 or later and create an additional shortfall of 400 million euros in the 2013 budget.
Finally, Greece’s creditors are also asking for a review of the various tax exemptions currently in force. The government’s aim once negotiations resume is to complete the mission’s review of Memorandum requirements and receive the European Commission’s approval before the last third of July. In this case, the path will be open for the disbursement of the next bailout tranche of 8.1 billion euros, which will be paid in “installments” based on implementation of prior actions.
Simultaneously, the IMF will be able to convene in order to approve the 1.8-billion-euro loan tranche to be given by the IMF. Otherwise, if the IMF discerns a ‘gap’ in Greek finances for 2013-2014 in August, it will be forced by its charter to suspend aid to Greece and will have to call for another ‘haircut’ of Greek debt, in spite of Germany’s disagreement.