New Austerity Bill strikes Greeks with €5.1billion until 2022

Greece submitted a draft bill to parliament late on Friday, a bill fully packed with austerity measures worth 5.1 billion euros and counter-measures worth 1.5 billion, in an effort to sweeten the bitter pill to thousands of pensioners and employees.

The bill outlines reforms in the energy, pension and labor sectors as the government races to secure the last loans from its international bailout program, conclude the last program review and head to a so-called “clean exit” in August.

The bill includes the country’s medium-term fiscal strategy framework through 2022, which foresees an average 2 percent annual growth and pledges to increase minimum wages and restore collective labor bargaining.

• Pension cuts up to 18% to be implemented as of 2019.
• Tax-free basis will be broadening to annual income of 5.686 euros, when EU’s poverty line is at 6,000. The measure to go into effect as of 2020.
• Privatizations worth 3.9 billion euros

Lawmakers are expected to vote on the bill on upcoming Thursday, before the Eurogroup of June 21.

Athens is keen to pass a final review by its creditors ahead of a Eurogroup meeting on June 21, where it is also hoping for progress on a deal on further debt relief to be implemented after the current bailout program expires in August.

If it gets the green light from the review and Eurogroup, it will receive about 12 billion euros ($14 billion) of new loans.

The government also submitted to parliament its fiscal plan for 2019-2022, projecting higher than targeted primary surpluses on an annual basis.

The revenues will increase through the pension cuts, the changes in real estate objective value that will increase the property taxes,  scrapping the decreased of Value Added Tax on all islands, scrapping the 15% discount on social security contributions as of 2019.

• Pension cuts worth €2.9 billion annually. 1.2 billion will be cut from public sector pensions and 1.4billion on private sector pensions.
• Broadening the tax-free basis will bring revenues worth €1.9 billion.

The counter-austerity measures include pledges to:

• increase the minimum wage currently at €586 gross per month. The government is considering to follow the Portuguese model, i.e. four increases of 5%.
• hire more than 42,000 people within the next 5 years
• one extra pension in 2019
• possibility for V.A.T. exceptions for annual income up to 10,000 euros
• tax rate cuts for natural persons
• tax rates cuts for businesses from 29% to 26%
• Decrease of Unified property tax at 290 million as of 2020.
• Tax-free up to €6,000 for housewives, unemployed, students, ‘workers’ at program to obtain labor experience, provided their deemed income is no more than 9.500 euros.

The government plans see unemployment at 13.1 % in 2022 – It is currently and constantly at 20%

Greece’s current loan program, its third since 2010, is worth up to 86 billion euros. So far, Athens has received 46 billion euros in aid, and the Eurogroup has yet to decide on what it will do with the remaining funds, once it has paid out the final 12 billion of loans.