Gap Between Greece-Creditors Remains After 5 Days of Talks

Sunday, March 5th, 2017
Last Update: 16:23

No progress has been made after the fifth day of negotiations between Greece and creditors over the bailout program review, according to sources close to the talks.

While talks on labor law reforms started on Sunday, the gap between the two sides remains open since creditors insist on further fiscal measures after the end of 2018. Greece’s lenders, and the International Monetary Fund in particular, do not seem convinced that the countermeasures Athens is proposing to ease the burden of  proposed measures are feasible.

At the same time, Brussels has already made clear that if negotiations delay a little longer, then the target to have a technical agreement before the March 20 Eurogroup will be lost.

Creditors also point out that if the agreement is postponed for April, the decisions for primary surpluses and the European Central Bank quantitative easing (QE) will delay further because there will not be a new government in the Netherlands yet and France will be in the midst of election period.

The IMF continues to ask for measures of 2% of GDP in 2019 coming from pension cuts and the lowering of the tax-free income threshold, while it rejects most of the compensatory measures proposed by the Greek side. The Fund believes that the tax-free income threshold is too high, thereby half of Greeks are exempt from income tax. Also, the IMF considers that since the pension system has a deficit of 11% of GDP, there should be further pension cuts.

The ministers of the Greek negotiating team, however, argue that the IMF estimates for the Greek economy are based on wrong data and assumptions, referring the issue back to the creditors’ technical teams. They argue that only 11-12% of the population are exempt from income tax, especially when 30% of citizens have incomes close to the poverty line.

Regarding the security fund system, the Greek side that the 11% deficit in pensions is not created from a fiscal deficit, but includes state funding as well.

The mission heads will meet again on Monday to continue talks on the same issues. Meanwhile, government officials state that lenders never asked for pension cuts to take effect from 2018.

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