More austerity beckons as Greece, lenders resume talks

ATHENS: Greece and its lenders resumed a long- stalled review of its bailout, with the government in Athens braced to commit to yet more austerity in exchange for the funds the country needs to remain solvent.

The review has dragged on for months, partly due to a rift between the European Union and the International Monetary Fund over Greece’s fiscal goals and prospects next year – when the current rescue programme expires – and beyond.

To help break the impasse, the Greek government last week agreed to pre-legislate economic reforms, including cuts in income tax breaks and pensions.

Those would take effect from the start of 2019, the year parliamentary elections are due.

Those would only kick in if the government misses a target of generating a primary surplus of 3.5 per cent from 2019, but on the condition that any impact would be offset elsewhere.

“We are trying to get a staff-level agreement by the next Eurogroup in March,” Greek Finance Minister Euclid Tsakalotos told lawmakers.

The lenders are asking Greece to make extra savings worth 2 per cent of gross domestic product, so it can meet a target of a 3.5 per cent primary surplus – which excludes debt-service costs – that they have set for 2018 and the post- bailout period.

“The lenders’ representatives will ask for measures of 1 per cent from lowering the tax-free threshold and another 1 per cent from pension cuts,” an official with knowledge of the negotiations in Athens told Reuters on condition of anonymity.

The government estimates the 2016 primary surplus will exceed 2 per cent of GDP, well above the lenders’ 0.5 per cent target, after the economy unexpectedly returned to growth last year.

“Without publicly saying it, Athens wants the total (additional) measures to be worth around 1.5 per cent of GDP, after the betterthanexpected surplus and better economic performance,” a second source close to the talks said. — Reuters