Athens Letter week beginning April 25
The talks between Greece and its creditors resumed on Monday with higher hopes to seal a deal on reforms for bailouts, while the country’s new set of “contingency” measures sought to discover if financial targets can be met by 2018.
The contingency measures were drawn up to satisfy European institutions and the IMF which disagree on whether the current reforms are sufficient in being able to reach the country’s financial targets. However, Greece’s Finance Minister Euclid Tsakalatos said there is no legal framework in the country’s constitution to legislate measures preemptively.
Greece was asked to create a primary surplus equivalent to 3.5 percent of its GDP by 2018, while the IMF says the country can only collect 1.5 percent.
Despite the positive atmosphere following a Euro group finance ministers’ meeting in Amsterdam, there are still points of disagreement between the sides including the tax exemption threshold. So far, it is unlikely that an agreement will be made at the Euro group’s emergency meeting this Thursday.
The Syriza-ANEL government rapidly moved on to bring the agreed set of austerity measures to the national assembly without conclusion from the negotiations. The social security and pensions bill was approved in the related parliamentary commissions on Tuesday, however, a vote for the bills is planned to take place next week after the Orthodox Easter holiday.
A one point increase in VAT to 24 percent was decided to come into effect from July. The raise in tax is foreseen to bring €1.8 billion annually to the state budget.
Good news for Greek finances came from the European Commission. The Greek budget had a primary surplus of 0.7 percent of GDP beating estimations from both the EU and IMF. IMF head Christine Lagarde welcomed the announcement, however, she casted her doubt by saying “if it is accurate” in Amsterdam on the sidelines of the Euro group meeting.
Despite the damages weighing on the Greek economy due to the protracted talks for months, there is still a long way to go and difficulties lie ahead for Prime Minister Alexis Tsipras when the bitter pill of austerity reforms is put to the vote.
