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02 April 2015

Financial Times: Greece submits new list of reforms to eurozone

It is the cash-strapped government’s most comprehensive effort so far to unlock €7.2bn in bailout funds before it goes bankrupt.

The 26-page document, obtained by the Financial Times, relies on plans to crack down on tax evasion and fraud to raise most of the revenues. These include €875m from audits of offshore bank transfers and €600m from a new lottery scheme aimed at compelling consumers to demand value added tax receipts.

The tenor of talks between Athens and its international bailout inspectors — the European Commission, European Central Bank and International Monetary Fund — has improved in recent days, and Greek officials have expressed hope that they could reach an agreement on the measures as soon as next week.

“The larger purpose of this document is, in the first instance, to unlock short-term financing that will permit the Greek government to meet its immediate obligations,” the document states in a short introduction. “The Hellenic Republic considers itself to be a proud and indefeasible member of the European Union and an irrevocable member of the eurozone.”

The submission comes after a previous effort sent to the inspectors on Friday received a lukewarm reception from eurozone authorities, who said it lacked detail and substance. Talks on the initial submission broke off on Tuesday without agreement and officials said there was little chance of restarting without more co-operation from Athens.

Despite the improved atmosphere, several EU officials said they did not expect a deal before the next scheduled meeting of eurozone finance ministers in Riga on April 24. Some officials remain concerned that Athens does not have sufficient funds to make a €450m payment to the IMF on April 9, but Greek officials insist they can scrape enough together to get by.

The group of 19 eurozone deputy finance ministers discussed the new reforms by phone on Wednesday, but there was little progress. One senior official said that the new submission was still considered insufficient. “I see no chance of any agreement until Riga,” the official said.

Although the submission marks another effort by Athens to meet eurozone concerns, the measures are similar to Friday’s initial effort and fail to address several issues that bailout monitors have insisted on, including an overhaul of the Greek pension system and greater labour market liberalisation.

Indeed, the proposal appears to reverse reforms in several of these areas. The document includes €1.1bn in fresh spending this year, more than half of it reinstating a so-called “13th pension” — an extra month’s pay — for low-income pensioners. The document suggests that change would add €600m this year. 

It also would suspend a so-called “zero deficit clause” that would force more cuts to state pensions; the measure would add another €326m this year.

And while the document includes five separate measures under the heading “labour market reforms”, they include a gradual increase in the minimum wage and strengthening collective bargaining — both measures that would tend to undo reforms adopted earlier in the rescue programme.

Still, the document includes concessions to eurozone authorities, particularly in the area of privatisations. Some government ministers from the far left of the governing Syriza party have publicly stated that all privatisation of state assets would come to an end.

However, the latest document says “all existing contracts will be honoured [and] all the procedures that have started are going to continue”. Remaining privatisations would be considered “on a case-by-case basis”, and are projected to bring in €1.5bn this year, down from €2.2bn in the original bailout agreement. 

“Seldom has a privatisation programme failed so spectacularly!” the documents states. “The Greek government considers this target unrealistic, as investors’ interest is low, and competition among bidders is weak.”

Full article on Financial Times (subscription required)

© Financial Times

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