Post-bailout talks with lenders to start on Sept. 10

No sooner had Greece completed its third and final bailout program than European Commissioner for Economic and Financial Affairs Pierre Moscovici announced a new round of talks between the Greek government and its lenders beginning on September 10 in Athens, on the country’s draft budget for 2019.

The institutions want to reach an agreement on the measures before the draft budget is tabled in Parliament on October 1. The visit is expected to last a week and is seen as a first test of relations between the two sides in the post-bailout era.

According to sources, the left-led government is expected to present the full agenda of its plans for tax cuts and handouts for 2019, paving the way for the next election campaign.

Prime Minister Alexis Tsipras is seen presenting some of these measures during his keynote speech at the annual Thessaloniki International Fair (TIF) earlier in September.

The key issue for the Greek government is whether it will be allowed to postpone, if not abolish, pension cuts that are to apply as of January.

Sources said the two sides may not reach a decision on the issue next month. In that case, the cuts will be included in the draft budget with final decisions deferred until the final draft is presented in Parliament later in the year, when there is a clearer picture regarding the economy.

The government also wants to discuss tax cuts for 2019, which will be within the fiscal space created by the primary surplus of 720 million euros.

Greece is expected to propose lowering the unified property tax (ENFIA) and social security contributions, and/or the low income tax rate.

However, if pensions cuts are eventually scrapped, it is possible that no further tax reductions or handouts will be approved for next year.

The government also wants to raise the minimum wage, a measure that the institutions have reportedly accepted, provided the increase is modest.

A seperate topic in the negotiations will be the distribution of the primary budget surplus of 2018, which is expected to reach 900 million euros.

The surplus will be paid as a one-off handout, as in the last two years, but detailed proposals will be presented once its size is specified.