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9th Dec 2022

Eurozone chief backs Greek reforms, but says more needed

  • Dijsselbloem: We fully support a functioning tax collection system, but short-term measures may be needed (Photo: consilium.europa.eu)

Eurozone chief Jeroen Dijsselbloem has backed the reforms plan submitted by the Greek government, but warned that measures such as a functioning tax collection system take time and the budget must not go "off-track" in the meantime.

Speaking in the European Parliament on Tuesday (24 February), Dijsselbloem, who chairs the meetings of eurozone finance ministers, said the list was a "first step" towards Greece receiving the remaining bailout money and possibly negotiating a third bailout.

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"Some of the Greek government's ambitions which we fully support, for instance an efficient tax system, will take time. It's one thing to pass omnibus laws through the parliament, another to actually implement those measures," he said.

"And the question is what we do meanwhile. We cannot allow the budget to go off-track, some more short term measures may be needed," Dijsselbloem added.

He was due to hold a conference call with fellow eurozone ministers at 14.00 Brussels time, during which it is expected Greece will get the green light for its bailout - which runs out on 28 February - to be extended by four months.

The reforms plan submitted "at 23.15 on Monday night", ahead of a midnight deadline, according to Dijsselbloem - is a major climb-down from previous pledges made by the far-left government led by Alexis Tsipras.

The seven-page letter, obtained by Reuters and the Financial Times, says it is just a "first comprehensive list of reform measures", which will be "further specified and agreed by the end of April 2015".

It pledges "robust efforts" to improve tax collection and fight evasion and "work toward creating a new culture of tax compliance to ensure that all sections of society, and especially the well-off, contribute fairly to the financing of public policies."

But the Greek government also commits itself to "review and control spending in every area of government spending (e.g. education, defence, transport, local government, social benefits)" - after initially promising to raise pensions and the minimum wage.

On pensions, the reforms plan pledges to "eliminate loopholes and incentives that give rise to an excessive rate of early retirements" and "consolidate pension funds to achieve savings".

It also says the Greek government will strive to bring pension contributions and income closer together and provide assistance to employees aged between 50 and 65 "so as to eliminate the social and political pressure for early retirement which over-burdens the pension funds".

Fighting corruption, money laundering and specifically the smuggling of fuel and tobacco products are other priorities mentioned in the letter.

The Tsipras government also pledges to reduce the number of ministries from 16 to 10; reduce the number of "special advisers" in the government; and to cap travel expenses and other benefits for ministers, MPs and other top officials.

On the pledge made last week by the Greek government that it will pardon the debt of poor people, the letter is more nuanced. It pledges to "de-criminalise lower income debtors with small liabilities" and target high-earners who have failed to pay their taxes, but without creating any moral hazard.

Labour market reforms - another thorny issue in the past weeks between the Greek government and its eurozone peers - are to be expanded and developed "in agreement with partners and when fiscal space permits". The Greek government now speaks of "phasing in" collective wage bargaining, and adds that this will "balance the needs for flexibility with fairness".

"This includes the ambition to streamline and over time raise minimum wages in a manner that safeguards competitiveness and employment prospects," the reforms plan reads.

"The scope and timing of changes to the minimum wage will be made in consultation with social partners and the European and international institutions, including the International Labour Organisation, and take full account of advice from a new independent body on whether changes in wages are in line with productivity developments and competitiveness," it adds.

The European Commission, for its part, praised the to-do list, saying it is "sufficiently comprehensive to be a valid starting point".

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