Review by Christos T. Panagopoulos –
Greek Finance Minister, Yannis Stournaras and the heads of the troika will be starting on Tuesday, with considerable differences between them, a new round of negotiations that will be among the most important so far. The government’s primary target is to convince the lenders’ representatives that additional measures amounting to 2-2.5 billion euros are not required for the next year and aims in parallel, among other things, to achieve immediate acceptance on the primary surplus amounting to at least 344 million euros this year.
Two of the four prerequisites also remain a “thorn” until now, on the basis of which the tranche for 1 billion euros that has been pending since last July will be disbursed.
The first concerns the restructuring plan for the country’s defence industries (EAS, ELVO) and LARKO. The government has proposed the separation of the military from the civil part for the defence industries and the continuation of the operation of the former, while for LARKO it is calling for the privatisation of the enterprise to go ahead, with the preservation of a section of its employees. On the contrary, the troika is seeking in essence the “padlock” for EAS and ELVO, disputing the implementation of the orders from abroad, as well as the defence reasons invoked by the government. As regards LARKO, it accepts its privatisation but on the basis of the “ERT model”.
On the question of suspension, the government must convince the troika that on the one hand the target of 12,500 civil servants has been achieved with the employees joining the AEI, that constitutes the first “wave” (it had to be implemented, on the basis of the memorandum, by the end of September). On the other hand, there must be a two-month extension for the second “wave” (with 12,500 civil servants as well) that, also according to the memorandum, must be implemented by the end of December. At the same time, it wants the layoffs of employees at ERT, those having unacceptable conduct and the employees of legal entities of private law that will merge or close to be added on to the total number of layoffs. However, the troika appears not to be accepting the government’s demands.
However, it is a fact that the government is going to the negotiating table with specific positions that it considers to be strong negotiating “cards” for the troika to be convinced that the image of the Greek economy has changed now: That there shall be a primary surplus in 2013 (the budget’s draft plan anticipates 344 million euros, while the Finance ministry believes that it can ultimately reach 1 billion euros), due to the better than expected course of tax revenues. Consequently, according to the government, the agreement must be activated for decisions to be taken in April 2014 on the public debt. (The troika is insisting that the discussion on the public debt will begin after the ratification by Eurostat in April of the surplus and possibly after the Greek presidency).
That recession this year will be smaller than the initial assessment and given even the limited growth in 2014 and interventions on handling tax evasion and contribution evasion, next year only structural measures of 500-700 million euros can be taken. (This includes, among other things, the full implementation of the unified salary scale in the narrow public sector and public utilities). In parallel, the government states, according to reports, that it is committed to tabling a supplementary budget in April, if it is ascertained that additional measures are necessary that, however, has not been discussed with the troika.
The lenders’ representatives, however, are insisting, according to reports to date, that in 2014 there shall be a gap amounting to 2-2.5 billion euros. They believe that in the social budget (social insurance and care) there shall be a “hole” totaling 1.8 billion euros, while a point of friction is also the fact that the government believes that from the performance of the measure of an increase in pensioning levels (it was decided at the end of 2012) more than 600 million euros will be saved over the 2013-2014 period, while the troika estimates the specific size at about 300 million euros.
However, the troika believes that the target of increasing tax revenues will not be achieved in 2014 from the restructuring of the tax collection apparatus and the implementation of the measures already ratified. Some are mentioning as an example the bill on the unified tax on real estate (it anticipates certified taxes amounting to 3.5 billion euros and revenues totaling 2.85 billion euros), that is taking “fire” from the deputies of the two parties participating in the government.
Consequently, the troika is calling for:
- On the one hand, measures amounting to 2-2.5 billion euros to be taken in 2014 (the memorandum mentions that with the budget for 2014 all the necessary measures must be taken to achieve a primary surplus amounting to 2.5 percent of GDP).
- On the other hand, all the measures for the 2015-2016 two-year period must be determined precisely as of now and be ratified by Parliament (possibly through the new Medium-Term Framework).
A “bras de fer” will be taking place at this point as well. With the government claiming that the discussion must not start now on the measures for the 2015-2016 two-year period, since it is not possible for the effect on the economy’s growth to be determined clearly yet, from the interventions in the public debt and from the performance of the reforms from 2015 onwards. And with the troika “replying” that as many pending issues as possible must be closed as of now, before Greece enters an election cycle.
SYRIZA on negotiations with troika and austerity measures
The main opposition Radical Left Coalition (SYRIZA), in a statement on negotiations with the troika, said that “we have lost count of how many times the government will back down from the policy of ‘tough negotiating’ to the ‘realism’ of the memorandum and the austerity measures”.
It added that “the only thing certain is that no matter how it baptises communicatively every time the strategy of submission towards the lenders, it remains the same in essence with its results in Greek society and the economy becoming, however, all the more disastrous”.