The Greek negotiation team has headed to Brussels for Monday’s critical Eurogroup session, where the Greek government hopes to hear a positive statement, that will ensure the continued provision of liquidity towards Greek banks and the necessary conditions and time for the completion of a staff-level agreement within the next two weeks.
The creditors stand firm and demand measures worth 2.7 billion euros, in order to secure a primary surplus over 1% GDP in 2015. The Greek government believes it can achieve a 0.7% to 1% surplus without any news measures, with the institutions estimating that the surplus will be between 0.5% and 0.7%.
Regarding privatizations, Greece aims to generate 1.7 billion euros in 2015 and a further 1.5 billion euros in 2016, however the creditors are doubtful. A lot will depend on the European Commission’s growth estimates in the summer, which is expected to be about 0.5% from 2.5% in the fall.
There are also disagreements regarding the proposed VAT reform, which was announced earlier by Finance Minister Yanis Varoufakis. Mr. Varoufakis spoke of two VAT rates, a low one for food, medicine and books and a higher one for everything else. The institutions want these rates to be 18% and 9%, while the Greek government wants a 16% and 6.5-to-7.5% rate respectively.
Amongst the other measures considered are the emergency taxation of the country’s 500 richest taxpayers, increasing the solidarity tax from 2.1% to 3% for incomes over 30,000 euros and increasing the luxury tax from 10% to 13%. The controversial real estate ENFIA will remain this year, despite the government’s pledge to abolish it, although there is a possibility of reducing objective tax values.
The government wants to withdraw serious of reforms in the pension system, with the creditors arguing that these changes would have a huge budgetary cost. Aside from the implementation of the “zero deficit” clause for supplementary pensions, the IMF wants to see all pensions reduced, even the lowest ones.
