Government faces mountain of work as cash runs low

After a first round of talks with creditors failed to establish virtually any common ground, the government must next week push efforts to honor bailout commitments as concerns about state coffers return.

With so many of the prior actions pledged to creditors pending, it appeared unclear whether the government would make enough progress next week to secure the release of a first tranche of 2 billion euros in loans.

But officials are already under pressure to compile a second bill featuring tough measures including increases to taxes on farmers and an overhaul of the pension system; the second bill is linked to another slice of 1 billion euros in loans.

The two sides have differing opinions on several issues, however, including on whether and how to impose a value-added tax on private education, on a law allowing debtors to honor their dues in a larger number of installments and on foreclosures involving primary residences.

Another sticking point is the budget for next year: the creditors are not convinced that the measures Greece is proposing will meet fiscal targets.

During his visit to Athens, French President Francois Hollande suggested that there should be more discussion about the threshold for foreclosures.

Berlin might not welcome any attempt to seek concessions, however. Also, there are fears that delays could revive the risk of a haircut on bank deposits.

If Greece’s banks are not recapitalized before the end of the year, new European rules on bank bailouts, coming into effect on January 1, mean deposits of over 100,000 euros can be tapped.

Before Greek banks can be recapitalized, however, Greece must undergo a review by creditors and that can only be done once both sets of prior actions have been legislated.

Meanwhile, state coffers are running low. This comes as the draft budget for 2016 indicates that authorities are hardly cutting spending, relying almost entirely on tax increases to achieve budget targets.

The draft points to only 214 million euros in cuts to primary expenditure while aiming to raise more than 2 billion euros from value-added tax increases alone.