Creditors suggest that Greece should proceed with government spending cuts instead of raising taxes and contributions in order to save security funds.
According to a new report by the European Central Bank, at this point the Greek government must proceed with state spending cuts and not impose new taxes and contribution hikes.
Creditors representatives left Athens last week unsatisfied with the lack of progress on key issues such as security fund reforms, bad loans settlement and the establishment of an independent state privatization fund.
The ECB report says that even though Athens has decided to impose new measures worth 5.7 billion euros — mainly taxes and social security contribution hikes — they are not sufficient to achieve primary surpluses in the coming years.
According to the report, the benefits from the increased taxes are only temporary. Instead, creditors propose government spending cuts until Greece’s economy is back to growth.
Greek Fin Min to Discuss Pension Funds and Fiscal Gap on Thursday’s Eurogroup
Greek Finance Minister Euclid Tsakalotos is to discuss the pending issues on Thursday’s meeting of Eurozone finance ministers. Social security funds and the 2016 fiscal gap will be the main topics for Greece.
The 900-million-euro fiscal gap for 2016 lenders see is on the table for over a month now and has not been resolved yet. The same applies to measures required so that Greece reaches a 3.1-billion-euro primary surplus for 2017. Both issues have not closed yet.
Regarding security fund reforms, there are still major differences with the Greek side insisting on a proposal that has been presented to creditors and rejected over a month ago.
Finally, on the establishment of an independent privatization fund, the Greek government has not made any progress yet. Lenders want to have a say on the management of the fund, something that the Greek government seems reluctant to accept.
European Union officials seem concerned that the Greek administration is placing party members, friends and relatives in key administration positions, thereby politicizing public administration. At the same time they hire many public sector employees when in fact state spending cuts are required.
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