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On Friday, after days of intense and difficult negotiations, Greece and the Eurogroup were able to approve an agreement covering the next four months.
Whereas Greece wanted to call the deal “bridging finance”, the Eurogroup insisted on calling it a “bailout extension” [at the end of the day it’s all debt] ; whereas Greece wanted 6 months to get their new plan together, the Eurogroup gave them 4 months; whereas Greece wanted to end supervision by the troika, the Eurogroup insisted they stay but with a new name: “the institutions” [who does this fool exactly?].
Greece did gain a concession insofar as the profit target the country must generate, being the difference between tax receipts and revenue income from nationalised industries, on the one hand, and public expenditure excluding debt repayments, on the other, can be dropped to 1.5% instead of 4.5% expected under the previous agreement. However to get this concession they agreed that no economic measures would be implemented without agreement of the “institutions”.
Late on Friday a statement was issued from Brussels outlining all of this. Monday night was set as the deadline for Athens to produce their economic proposals. Eventually they appeared on Tuesday morning and the institutions have approved them.
Reading the proposals one sees a great number of interesting policies. Among others are:
- Robust efforts will be made to improve [tax] collection and fight evasion making full use of electronic means and other technological innovations.
- Broaden the definition of tax fraud and evasion while disbanding tax immunity.
- Resolutely enforce and improve legislation on transfer pricing [corporation tax avoidance].
- Work toward creating a new culture of tax compliance to ensure that all sections of society, and especially the well-off, contribute fairly to the financing of public policies.
- Improved management of public finances.
- Review and control spending in every area of government spending (e.g. education, defence, transport, local government, social benefits)
- Work toward drastically improving the efficiency of central and local government administered departments
- Control health expenditure and improve the provision and quality of medical services, while granting universal access.
- Turn the fight against corruption into a national priority and operationalize fully the National Plan Against Corruption.
- Target fuel and tobacco products’ smuggling, monitor prices of imported goods (to prevent revenue losses during the importation process), and tackle money laundering.
- Reduce the number of Ministries (from 16 to 10).
- Reduce the number of ‘special advisors’ in general government
- Fringe benefits of ministers, Members of Parliament and top officials (e.g. cars, travel expenses, allowances)
- Tighten the legislation concerning the funding of political parties
- Improve swiftly, in agreement with the institutions, the legislation for repayments of tax and social security arrears
- Introduce instalment schemes for payment of overdue tax.
- De-criminalise lower income debtors with small liabilities
- Commit not to roll back privatisations that have been completed.
- Review privatisations that have not yet been launched, with a view to improving the terms so as to maximise the state’s long term benefits, generate revenues, enhance competition in the local economies, promote national economic recovery, and stimulate long term growth prospects.
The Greek government affirms its plan to:
- Address needs arising from the recent rise in absolute poverty (inadequate access to nourishment, shelter, health services and basic energy provision) by means of highly targeted non-monetary measures (e.g. food stamps).
- Evaluate the pilot Minimum Guaranteed Income scheme with a view to extending it nationwide.
- Ensure that its fight against the humanitarian crisis has no negative fiscal effect.
All of these proposals are very interesting but they raise the questions: How much will all of this cost to implement? And, how much money will these policies raise?
Given that Greece has a debt of over 300 billion euros in total, or roughly twice what the entire Greek government earns in one year, how can the Eurogroup agree to continue for four months with a set of proposals for which no one has any idea about the income to be gained and the expenditure to be incurred?
The key is in the last line of the policy document. It seems that they don’t actually mind very much what Greece does as long as “its fight against the humanitarian crisis has no negative fiscal effect.”
This means that Athens was unable to launch a massive programme of public-sector projects; new infrastructure construction, creation of new nationalised industries, etc., and was unable to rehire everyone who lost their job in the public sector under austerity.
So where are we now?
Greece has 4 months to start implementing as much of this as possible. Presumably by that time the Eurogroup will also want to see a budget to check that the net effect of the proposals is a profit for the government and not a loss.
All the richest people in the country have time to get any remaining assets that are not already out of reach of the government into tax havens, etc.
All the poorest people have 4 months to withdraw as much cash as possible from the bank in the knowledge that the ECB will continue to make sure the banks have money for lending.
Syriza has time to evaluate if they really can implement an economic plan that can create jobs, tackle the humanitarian crisis and deliver the election promises because ultimately, no one in Greece will really care if there was a reduced national debt, or if a port was nationalised or not. They will care that they have access to good quality health care, education and security in the case of unemployment and retirement.
If Syriza can’t see a way to deliver what they promised in the election Varoufakis may well be sent once more to Brussels to annoy the Eurogroup so that Greece is kicked out of the Euro, and then a real economic recovery can be started.
This Greek drama continues for now but four months will pass very quickly.