Germany proposes Greece pay primary surplus into trust account
Details of German Finance Ministry proposals for Greece to give up more of its fiscal sovereignty and come under closer economic control have been made public.
The document, seen by Kathimerini English Edition, proposes measures to build on the agreement between eurozone finance ministers in February that Greece’s loan instalments should be paid into an escrow account in order to ensure that the repayment of existing debt is guaranteed.
However, the German document also proposes that any money from a Greek primary surplus should also be paid into the trust account.
“A dedicated receipt (such as part of VAT income) in the volume of the requested GRC primary budget surplus could be transferred monthly to the trust account (as earmarking of GRC contribution to debt service),” the proposal says.
“The volume of the primary surplus is to be defined in the MoU. The trust account and the earmarking of revenue secure the delivery of the primary surplus and therefore the GRC contribution to the debt service.”
The document adds that should Greece not achieve a primary surplus, as agreed with the troika, it would have to decrease spending or increase revenue accordingly.
The German plan calls for automatic cuts should targets not be met.
“GRC establishes a simple rule for public expenditure. With the agreement of the Troika, cash deficits (deviations from budget plan) automatically lead to spending cuts equally divided through all spending programs (according to their budget share),” says the document.
The German Finance Ministry has also called for more external assistance to be provided to Greece to conduct structural reforms by enhancing the role of the EU Task Force.
“More intense, compulsory employment of external technical assistance for, among others, administrative capacity building, including for tax collection, corruption reduction, statistics, growth-enhancing investment strategies, use of structural funds, privatization process would further support the implementation of the program,” Berlin proposes.
It also suggests that technical assistance should be provided by the World Bank and the OECD.
The document concludes with proposals for growth-enhancing measures.
“In order to improve the acceptability of the program by the Greeks, those measures of control-enforcement could be complemented by growth and jobs-enhancing measures. The determining factor for investment and growth will be the rebuilding of confidence. In the short run, growth and jobs perspectives could be strengthened by the release of some structural funds dedicated to the 181 projects of high priority,” the German Finance Ministry proposes.
“The project of a public bank for investment currently under consideration could also be accelerated to support SMEs and infrastructure projects.”
There has been no official reaction to the leaked document from the Greek government.