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Eurogroup deal: Measures €3.6bn in pension cuts, tax-free threshold (2% GDP) in 2019-2020

Creditors representatives will return to Greece as early as possible to finalize the second review of the Greek bailout program. At a press conference after the Eurogroup meeting, Jeroen Dijsselbloem, said that Greece and creditors have reached a ‘great agreement’ in Malta.

“We agreed that measures 1% of the GDP will be implemented in 2019 and 1% of GDP in 2020,” Dijsselbloem said. He explained that “pension cuts will be implemented in 2019 and lowering the tax-free threshold in 2020.”

The total amount of these two measures is 3.6 billion euros.

The tax-free threshold is yet to be determined, reports of the week were saying creditors – in fact the IMF- wanted it down to 5,600-6,000 euro annual income gross.

He implied that the creditors also agreed with Greece on “counter-measures”, which Athens wants in order to spend if primary surpluses have been reached.

The final decision will be at the next Eurogroup, Dijsselbloem said.

The Greek government wants to spend the money to benefit the society.

Euro zone finance ministers have gathered in Malta on Friday in an effort to break a deadlock over Greece’s bailout, after meetings in Brussels and Berlin this week failed to reach an agreement that will pave the way for about €7 billion in aid for Athens.

Statements upon arrival

Eurogroup head Jeroen Dijsselbloem said before entering the meeting, he was “in a positive mood” about a breakthrough. “we have worked intensively during the last weeks, we have achieved some results.”

EU Commissioner Pierre Moscovici: “Today’s Eurogroup is important because everyone must be committed to agree on the parameters of a good agreement.

European Commission Vice President Vladis Dombrovskis: ” I  hope for progress at the Eurogroup, the parameters must taken into consideration.”

German finance Minister Wolfgang Schaeuble:“We have covered the largest part, an agreement will need a few more days. The projections of the IMF with regards to the Primary Surplus are a little more pessimistic than the ones of the Commission.”

The best I heard so far coming from Valletta is this

German state Deutsche Welle @dw_europe

German FinMin #Schäuble says he isn’t blocking agreement with #Greece. Anyone who says so is spreading #FakeNews. #Malta #Eurogroup

The government in Athens is awaiting for the official statement at the end of the Eurogroup meeting.

Greek government spokesman Dimitris Tzanakopoulos: ‘If everything goes well in today’s  Eurogroup we may conclude all procedures for the second review by end of the month.”

Greece and its international creditors have been wrangling over key economic overhauls that would allow bailout supervisors to return to Athens to conclude the second review of the Greek program and unlock the next tranche of bailout cash.

Return of the creditors representatives in Athens is essential to achieve the staff level agreement.

Talks between the government of Prime Minister Alexis Tsipras, European creditors and the International Monetary Fund have been stalled for months. One day,  the problem is the IMF’s participation, the other day the problem is the implementation of the additional austerity measures.

Two days ago, Prime Minister Alexis Tsipras warned that “the game of delays is over” and that “an agreement must be reached within April.

More on the Eurogroup decision, as soon as the Eurogroup uploads the official statement.

Of course, we will have to see what the IMF thinks about this agreement and start a new round of argument and delays…

Why pensions will have to undergo further cuts and why Greece’s poor will have to be taxed that’s another question.

PS For some weird reason the Greek – creditors negotiations remind me of  some great scenes from the Blues Brothers

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4 comments

  1. Aristides Xenos

    I cannot claim to understand all of this financial mevements but two thing occur to me.

    A large number of families are now dependent on one pension as their income ( and not just husband+wife but Whole families down to grandchildren). This will surely damage them if there is no lower threshold for the cut, pushing more into more poverty.

    Lowering the tax free threshhold will surely encourage more people to find a way to avoid the payments thus lowering the tax take for government.

  2. @Aristides: yes, quite correct. Moreover, the imposition of an arbitrary property tax (ENFIA) onto electricity bills has endangered the electricity supply of Greece. If DEH collapses, then the lack of reliable electicity infrastructures takes a country out of the developed world and into a Third World situation. This is particularly relevant for city-dwellers (who need a/c in very hot weather and electric heating in very cold weather) and for hospitals. It is, in fact, another potential catastrophe within the ongoing crisis of Greece.
    ~
    Basically, everything that the Troika has done to Greece is the exact opposite of what was needed — but fitted their rightwing neoliberal ideology, alongside a determination to suck the blood out of Greece to finance private banks in northern Europe. The behaviour of the IMF has been amateurish and shameful — more so than their conduct with non-European countries. The whole mess caused by banks and politicians is a long-term disaster: yet, their salaries and pensions have been increased. We live in disgusting times, with disgusting excuses for humanity making their corrupt and self-serving decisions as parasites on world civilisation.

  3. In response to Aristides points above, I would say that the measures announced are based on no sound economic rationale. They are intended solely to either allow governments facing disgruntled electorates later this year to appear tough and resolute and, so they hope, avoid a critical audit of how and why they used public funds to “bail-out” the Greek economy or to promote a particular set of policies (you can call them neoliberal policies if you like) that holds that everything should be run as a business – in other words that market metaphors, metrics, and practices should permeate all fields of human life and activity.

  4. Dear all, you are right, I agree.
    But as to the why these things happen, the answer is simple: Greece has been left to the Germans as a trophy to play with. They execute a programme of asset striping and genocide, in accordance with the motto: “empty the land and get it for free”. They have allies in this: corrupt local politicians and law makers for the last 8 years, bought for a fistful of dollars, and a decaying people who have accepted defeat and wait for their slow death in the new style extermination camps. It makes no sense wondering about other causes, solutions, etc. Save for a massive uprising, which will lynch the corrupt elites to death, There Is No Alternative (TINA).