The hard work of negotiating a new Greek settlement looked set to begin in earnest yesterday as the Eurogroup ministers accepted Athens’ list of proposals as a starting point for talks.
Greece was supposed to send the list to officials on Sunday or Monday, but the letter was finally sent yesterday. It includes changes to tax and spending plans, as well as some reforms to controversial areas such as pensions.
But the letter – and the ensuing negotiations and eventual implementation – are certain to provoke anger from both Greek voters and other European states that are coughing up.
This round of negotiations extends the current bailout only for a period of four months, so there will be more talks later this year. In part, those will depend on the implementation of reforms and the success of plans for economic growth. These are the proposals and the likely views of both sides at the negotiating table.
CRACKDOWN ON TAX EVASION
Greece has a terrible reputation for corruption and tax evasion, and a crackdown will please European lenders and honest Greeks. However, it is uncertain whether the bid to target fuel and tobacco smugglers can raise anything like the €4bn (£2.9bn) the government hopes for.
Varoufakis says he will reduce incentives for public workers to retire early, and try to harmonise the fiendishly complex system. The government also wants to consolidate pension funds to make the administration more efficient. That will irritate some Syriza voters who cherish their gold-plated, early retirement pensions. But the plan does not include any cuts to pensions, which has angered the International Monetary Fund. “There are neither clear commitments to design and implement the envisaged pension reforms… As you know, we consider such commitments and undertakings to be critical for Greece’s ability to meet the basic objectives of its Fund-supported programme,” wrote IMF boss Christine Lagarde.
CUT STATE SECTOR BENEFITS
The number of government departments will fall from 16 to 10, with ministers’ and MPs’ perks trimmed and the number of special advisers slashed. Varoufakis’ letter also promises “to improve recruitment mechanisms, encourage merit-based managerial appointments, base staff appraisals on genuine evaluation”. This will meet with the approval of EU countries and the IMF, but could be seen as a betrayal of public sector voters who wanted protection and perks to be maintained – and had even been promised a new round of mass hiring.
PUBLIC SPENDING REVIEW
The Greek government wants to spend more, but has no money. As a result, it is promising to “review and control spending in every area of government spending” and to “identify cost saving measures through a thorough spending review of every ministry and rationalisation of non-salary and non-pension expenditures”. This sounds positive for creditors, but if salaries and pensions – making up 44 per cent of spending – are not included in the review, it will provoke a reaction from European lenders. Pledges to improve efficiency will be welcomed by the rest of the Eurogroup, but again it risks angering voters who had been told the tough years were over.