Talks with lenders to focus on tax reform, pensions, fiscal gap

Government officials on Monday launched a new round of talks with envoys representing Greece’s international creditors, with the thorny issues of pension reform, the fiscal gap and a tax overhaul topping the agenda of negotiations.

According to sources, the foreign officials will be presented with the government’s proposal for an overhaul of the tax system on Tuesday. Meanwhile, Labor Minister Giorgos Katrougalos is to delve into the discussion for a pension shake-up while Economy Minister Giorgos Stathakis starts talks on the legal framework governing the sale of nonperforming loans of held by Greek banks.

Athens aims to convince creditors to extend current laws protecting NPLs from sale to distress funds, sources said.

A government official indicated on Monday that the creditors are “well-meaning” but concerned about “the numbers adding up,” noting that the International Monetary Fund in particular has retained its usual tough stance on several issues.

The envoys are said to have made it clear that they disapprove of the philosophy behind the Greek government’s pension proposal. They are also keen for a new tax framework to be drawn up as soon as possible and that the two proposals – for pension and tax reform – complement each other.

Immediately after their talks with foreign auditors on Monday, Finance Minister Euclid Tsakalotos and Stathakis met with Tryfon Alexiadis, the deputy finance minister in charge of tax issues, for talks on the evolving blueprint for tax reform which is to include changes to levies on farmers and to the income tax scale.

The envoys are expected to stay in Athens until Friday before taking a brief break, allowing the negotiations to continue at the technical level, with their return scheduled for February 15.

Speaking at a business conference on Monday, Prime Minister Alexis Tsipras stressed the importance of a timely completion of the creditors’ review for Greece to regain access to cheap funding from the European Central Bank, which currently does not allow Greek banks to use government bonds as collateral for drawing liquidity.

Success in the negotiations would “pave the way for cutting the Gordian knot,” Tsipras said.