March 31, 2015

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That list in full - almost

After a whole weekend of negotiations with EU officials, the Greek reform list the Greek government sent on Monday came as a disappointment. EU officials were not only unhappy about the form, the documents were sent only in electronic form and in Greek, but also the substance. Measures focused mainly on crackdowns on waste, fraud and tax evasions and new efficiency gains in public administration. It is not even a complete list, as the FT observes, as Tsipras' concession to keep the property tax Enifa in place was not even listed. It does not have to be complete, as last night's deadline was not binding but self imposed. The Greek government estimates it can realise €4.7bn through new taxes and privatisations, according to Spiegel Online. The list and its details as outlined by Macropolis are very much a Syriza programme:

New tax revenues:

  • €1.5bn through privatisations. The target was revised downwards from €2.2bn and includes the sale of Piraeus port, horse-betting licensing and a tender on regional airports.
  • €2bn from tax evasion: €725m from audits on bank transfers abroad; €600m from tax arrears settlement (the law already in force); €350m from the fight against VAT fraud and €250m from tackling fuel and tobacco smuggling;
  • €800m from more efficient tax collection; €300m from streamlining the income tax code; €270m from a Portuguese-style VAT lottery scheme; and €225m from tightening the revenue collection mechanism;
  • New tenders: €200m for e-gaming and €350m for TV licences; 

There are also more expenditures of slightly above €1bn. A reintroduction of the 13th month pension for ex civil servants living below the poverty line will cost €600m, postponing the zero-deficit clause for auxiliary pensions €326m, and €82m for retaining current conditions for pensioners who receive the Social Solidarity Allowance.

On the structural reform front, Macropolis lists the following:

  • Strengthening the autonomy of the General Secretariat of Public Revenues (GSPR);
  • Blocking early retirements that undermine the sustainability of the pension system;
  • Modernising the income tax code and eliminating exemptions;
  • Introducing a system of multi-lateral cancellations of arrears both from the state to taxpayers and vice versa.
  • Implementing an organic budget law that improves the management of public finances.
  • Allowing the out of court settlement of non-performing loans (NPLs).
  • For this the Greek government wants to set up a new "bad bank," to be financed by the €10.9bn recapitalisation funds Greece had returned to the EFSF. 
  • Adopting a new code of civil procedure, encouraging greater specialisation of courts and launching an electronic submission system to speed up the dispensation of justice.
  • Improving the credibility and institutional independence of the Hellenic Statistical Authority (ELSTAT).

Estimates for these kind of measures are frequently unreliable even in jurisdictions with a proven record of efficient tax collection – and new efficiencies in public administration, something frequently promised by all governments seeking to squeeze cash out of the system, have mixed results, writes the FT.

The Brussels Group or troika will have a first go on the measures. Then there will be a teleconference of the Euro Working Group this week. The full meeting at ministerial level won't happen until next week, pushing out a decision about the adequacy of the list for another week.

In case this list is rejected, the finance ministry seems to be working on another list, reform list No 2, at least according to iefimerida.

Alexis Tsipras called on opposition parties to rally in a national effort to end austerity in his address to Parliament on Monday night on the current developments, the ANA newsagency reports. 

A very long Bloomberg story meanwhile, contained a nugget of interesting information - of a conflict between the ECB and the SSM in the handling of the Greek banks. It is not clear to us from reading this report whether the conflict is significant or not - we suspect not - but there seems to have been misgivings by members of the ECB's governing council about the way the SSM sought to block increases in Greek banks holdings of short-term debt, just hours before a recent EU mini-summit, in which Mario Draghi and Alexis Tsipras took part. One anonymous official quoted in the article called the move clumsy, and said it interfered with the ECB's measured strategy to addressing the situation in Greece.  

In a really gloomy column, Hugo Dixon writes that Tsipras' only chance is to break with the left wing of his party, as we are only days away from an increasingly likely default. He goes through the options, the possibility of a snap elections. Tsipras' government's popularity has fallen from 83% to 60%, but once elections are called, people would raid their bank accounts, and you may see rationing of cash and commodities such as patrol - not what you want in the middle of an election campaign. The only rational alternative for him is to engage with the creditors, and accept a compromise, which he will then need to push through the parliament against his own left faction, but with the support of other parties in opposition. 

"The prime minister could then kick out his far-left faction and replace its MPs with moderates. In this scenario, there wouldn’t have been a rupture with Greece’s creditors or capital controls, so Tsipras would be well placed to win the election with an enhanced majority. The snag is that the prime minister would have to summon up the courage to break with his political comrades. It is unclear whether he is tough enough to do this."

Dixon writes that his best bet is to pursuade creditors that he is so serious about structural reforms that they do not tighten the austerity screws any further. But this is clearly not happening, as his team is not on top of the detail. What Tsipras needs is a rupture with the left.

Our other stories

Today we also have stories on the reaction to the French departementales; Macron law number II; how to interpret German wage increases; commentary on Italy's economy; and records for corporate debt.

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