Cutter’s jaws could be widened

Gov’t considers inclusion of tax-free threshold, pensions in revised plan for activation of fiscal mechanism

In its efforts to reach a compromise with the creditors for the completion of the second bailout review, the government is examining a scenario whereby the automatic fiscal mechanism agreed last year (aka “the cutter”) would also include the reduction of the tax-free threshold and pensions. The cutter forces the Greek government to take corrective action if it fails to meet its fiscal target.

However, the scenario does not provide for the quantification of those particular measures or their introduction into legislation in advance, as the International Monetary Fund is demanding.

Sources say the Finance Ministry has not ruled out the possibility of including the above measures in the context of extending the cutter beyond 2018. The final text will also describe a process to simplify the acti- vation of the mechanism. The government has not yet determined the plan in all its details. However, this is supposed to constitute a goodwill move by Athens to unlock the negotiations and go some way toward satisfying the IMF’s demands.

Ministry officials make it clear the government has no intention of proceeding with the legislation of measures in advance, as the Fund desires, and cite the acknowledgement of Eurogroup head Jeroen Dijsselbloem that such a move would contravene the Greek Constitution.

Such is the extent of the problems in negotiations with the country’s creditors that Greece is not expecting any more from tomorrow’s Euro Working Group meeting than the determination of a timetable for the next moves required to conclude the second bailout review.

Therefore the ministry does not expect the review to be finished within January, although Labor Minister 1.0567 Effie Achtsioglou said yesterday the process will be finished by the month’s end. The Finance Ministry’s new target is February 20, when next month’s Eurogroup meeting is scheduled for.

It is in this context that minister Euclid Tsakalotos is meeting his French counterpart Michel Sapin in Paris today, before holding talks with European Commissioner for Economic Affairs Pierre Moscovici tomorrow in Brussels.