Gov’t, creditors already at odds over budget

Negotiations have not yet started between the government and the country’s creditors but there are already several serious points of contention, with the creditors foreseeing a significant budget deficit for next year, Kathimerini understands.

One issue that has divided the two sides relates to the primary surplus targets for the coming years, which Athens wants to scale back.

Creditors also object to plans by the Greek government to introduce a so-called Social Solidarity Income for poorer Greeks, predicting that such a move would blow a hole of around 900 million euros in the national budget for 2017.

The Greek Finance Ministry plans to fund the Social Solidarity Income through cuts to the Defense Ministry’s budget worth around 250 million euros as well as broader cutbacks across the public sector.

But foreign auditors are reportedly unconvinced that such an overhaul could raise the necessary budget savings. According to sources, representatives of the country’s creditors are calling on the government to scale back a series of benefits and tax breaks that burden the budget by an estimated 950 million euros annually.

The creditors’ opposition to the government’s plans to introduce social welfare benefits – in an effort to counterbalance the austerity it has been obliged to enforce over the past year – is expected to hamper efforts to sign off on an midterm program later this year.

Apparently anticipating this, Finance Minister Euclid Tsakalotos said recently that the final version of the government’s midterm program will be submitted to Parliament after the second review of Greece’s bailout.

The completion of that review, which includes 15 so-called prior actions, will lead to the release of 2.8 billion euros in rescue loans. One of the 15 prior actions is the creation of a five-member supervisory panel to oversee a new privatization fund.

This panel is to comprise three Greek government representatives as well as a French and a Spanish official from the side of the creditors, Kathimerini understands.

But there seems to be less convergence on the remaining commitments, which include measures to introduce greater flexibility to the labor market and regulate the market for nonperforming bank loans.

The first assessment of progress in this area is to to be made at a Euro Working Group meeting scheduled for August 29.