There is nothing incrementally new or different to what we
revealed earlier in the
leaked Greekproposal (i.e., no actionable
pension cuts, no debt "reprofiling") and as Bloomberg makes it all
too clear in flashing red headlines:
GREEK GOVT PROPOSAL SIMILAR TO EU COMMISSION'S JUNE 26
PROPOSAL
... or the one which
61% of the Greek people said no to.
What's worse, the proposal will be promptly deemed as
insufficient because as Merkel made clear in the past four days,
the old proposal is no longer valid due to the collapse in the
Greek economy since capital controls were imposed and will,
ironically, have be far harsher to offset the slowdown in the
economy. To make things worse, the proposed indirect (no direct
ones) pension cuts, and lack of a request for debt relief will be
certain to infuriate the Greek population.
The broad strokes: a 3 year, €53.5 billion bailout program,
including €35 billion of growth measures, lasting through June 30,
2018 requesting funds from the ESM, seeking to finally put the IMF
off to the side.
The program is heavy on revenue promises and lite on actual
spending cuts. Greece hopes to achieve a 1% primary budget surplus
in 2015, rising to 2%, 3%, and 3.5% by 2018, all of which are now
impossible due to the total collapse of the economy in the past
week.
Among the tax reform will be a modest increase in corporate tax
from 26% to 28%.
The changes to the VAT system are as noted previously, keeping
the VAT on hotels at 13% but raising it to 23% for restaurants;
Greece also promises to eliminate discounts on islands, starting
with the islands with higher incomes and which are the most popular
tourist destinations.
However, it is the pension side where the issues remain, and it
is here that once again there is little actual direct reductions.
Among the promises, most are the generic fluff previously agreed
on:
create strong disincentives to early retirement, incur penalties
for early withdrawals, make all supplementary pension funds
financed by own contributions; and so on.
The good news for the Troika is that Greece will seek to
"gradually phase out the solidarity grant (EKAS) for all pensioners
by end-December 2019" - who will be impacted and when: "the top 20%
of beneficiaries in March 2016." In other words another 9 months of
non real action. The bad news for the Troika is that Greece will
also "freeze monthly guaranteed contributory pension limits in
nominal terms until 2021."
More in the full proposal, but the truth is that while making
some concessions, the Greek proposal may still be insufficient for
Merkel, and certainly won't be sufficient for the IMF due to the
lack of real pension cuts.
Worse, Syriza will have to vote on this proposal tomorrow and
explain to the people why nearly two thirds of them just voted No
to a deal which the government itself is now hoping will pass.
But worst of all, nowhere in the draft sent to creditors is
there anything requesting or even hinting about Greek debt haircut,
relief or even reprofiling.
And all of this will happen as a massive Oxi demonstration takes
place in front of government, so be on the lookout for a repeat
appearance by the riotcam.
* * *
Full text below (
via Amna)
10/ 07/ 2015
The full proposal submitted by the Greek government to the
Eurogroup earlier on Thursday is the following:
"Greece: Prior Actions
Policy Commitments and Actions to be taken in consultation
with EC/ECB/IMF staff:
1. 2015 supplementary budget and 2016-19 MTFS
Adopt effective as of July 1, 2015 a supplementary 2015
budget and a 2016–19 medium-term fiscal strategy, supported by a
sizable and credible package of measures. The new fiscal path is
premised on a primary surplus target of (1, 2, 3), and 3.5 percent
of GDP in 2015, 2016, 2017 and 2018. The package includes VAT
reforms (¶2), other tax policy measures (¶3), pension reforms (¶4),
public administration reforms (¶5), reforms addressing shortfalls
in tax collection enforcement (¶6), and other parametric measures
as specified below.
2. VAT reform
Adopt legislation to reform the VAT system that will be
effective as of July 1, 2015. The reform will target a net revenue
gain of 1 percent of GDP on an annual basis from parametric
changes. The new VAT system will: (i) unify the rates at a standard
23 percent rate, which will include restaurants and catering, and a
reduced 13 percent rate for basic food, energy, hotels, and water
(excluding sewage), and a super-reduced rate of 6 percent for
pharmaceuticals, books, and theater; (ii) streamline exemptions to
broaden the base and raise the tax on insurance; and (iii)
Eliminate discounts on islands, starting with the islands with
higher incomes and which are the most popular tourist destinations,
except the most remote ones. This will be completed by end-2016, as
appropriate and targeted fiscally neutral measures to compensate
those inhabitants that are most in need are determined. The new VAT
rates on hotels and islands will be implemented from October 2015.
The increase of the VAT rate described above may be reviewed
at the end of 2016, provided that equivalent additional revenues
are collected through measures taken against tax evasion and to
improve collectability of VAT. Any decision to review and revise
shall take place in consultation with the institutions.
3. Fiscal structural measures
Adopt legislation to:
close possibilities for income tax avoidance (e.g., tighten the
definition of farmers), take measures to increase the corporate
income tax in 2015 and require 100 percent advance payments for
corporate income and gradually for individual business income tax
by 2017; phase out the preferential tax treatment of farmers in the
income tax code by 2017; raise the solidarity surcharge;
abolish subsidies for excise on diesel oil for farmers
and better target eligibility to halve heating oil subsidies
expenditure in the budget 2016;
in view of any revision of the zonal property values, adjust
the property tax rates if necessary to safeguard the 2015 and 2016
property tax revenues at €2.65 billion and adjust the alternative
minimum personal income taxation.
eliminate the cross-border withholding tax introduced by the
installments act (law XXXX/2015) and reverse the recent amendments
to the ITC in the public administration act (law XXXX/2015),
including the special treatment of agricultural income.
adopt outstanding reforms on the codes on income tax, and tax
procedures: introduce a new Criminal Law on Tax Evasion and Fraud
to amend the Special Penal Law 2523/1997 and any other relevant
legislation, and replace Article 55, ¶s 1 and 2, of the TPC, with a
view, inter alia, to modernize and broaden the definition of tax
fraud and evasion to all taxes; abolish all Code of Book and
Records fines, including those levied under law 2523/1997 develop
the tax framework for collective investment vehicles and their
participants consistently with the ITC and in line with best
practices in the EU.
adopt legislation to upgrade the organic budget law to: (i)
introduce a framework for independent agencies; (ii) phase out
ex-ante audits of the Hellenic Court of Auditors and account
officers (ypologos); (iii) give GDFSs exclusive financial service
capacity and GAO powers to oversee public sector finances; and (iv)
phase out fiscal audit offices by January 2017.
increase the rate of the tonnage tax and phase out special tax
treatments of the shipping industry.
By September 2015, (i) simplify the personal income tax credit
schedule; (ii) re-design and integrate into the ITC the solidarity
surcharge for income of 2016 to more effectively achieve
progressivity in the income tax system; (iii) issue a circular on
fines to ensure the comprehensive and consistent application of the
TPC; (iv) and other remaining reforms as specified in ¶9 of the IMF
Country Report No. 14/151.
On health care, effective as of July 1, 2015, (i)
re-establish full INN prescription, without exceptions, (ii) reduce
as a first step the price of all off-patent drugs to 50 percent and
all generics to 32.5 percent of the patent price, by repealing the
grandfathering clause for medicines already in the market in 2012,
and (iii)) review and limit the prices of diagnostic tests to bring
structural spending in line with claw back targets; and (iv)
collect in the full the 2014 clawback for private clinics,
diagnostics and pharmaceuticals, and extend their 2015 clawback
ceilings to 2016.
Launch the Social Welfare Review under the agreed terms of
reference with the technical assistance of the World Bank to target
savings of ½ percent of GDP which can help finance a fiscally
neutral gradual roll-out of the GMI in January 2016.
Adopt legislation to:
reduce the expenditure ceiling for military spending by €100
million in 2015 and by €200 million in 2016 with a targeted set of
actions, including a reduction in headcount and
procurement;
introduce reform of the income tax code, [inter alia covering
capital taxation], investment vehicles, farmers and the self-
employed, etc.;
raise the corporate tax rate from 26% to 28%;
introduce tax on television advertisements;
announce international public tender for the acquisition of
television licenses and usage related fees of relevant frequencies;
and
extend implementation of luxury tax on recreational vessels in
excess of 5 meters and increase the rate from 10% to 13%, coming
into effect from the collection of 2014 income taxes and
beyond;
extend Gross Gaming Revenues (GGR) taxation of 30% on VLT games
expected to be installed at second half of 2015 and 2016;
generate revenues through the issuance of 4G and 5G
licenses.
We will consider some compensating measures, in case of fiscal
shortfalls: (i) Increase the tax rate to income for rents, for
annual incomes below €12,000 to 15% (from 11%) with an additional
revenue of €160 million and for annual incomes above €12,000 to 35%
(from 33%) with an additional revenue of €40 million; (ii)
the corporate income tax will increase by an additional percentage
point (i.e. from 28% to 29%) that will result in additional
revenues of €130 million.
4. Pension reform
The Authorities recognise that the pension system is
unsustainable and needs fundamental reforms. This is why they will
implement in full the 2010 pension reform law (3863/2010), and
implement in full or replace/adjust the sustainability factors for
supplementary and lump-sum pensions from the 2012 reform as a part
of the new pension reform in October 2015 to achieve equivalent
savings and take further steps to improve the pension system.
Effective from July 1, 2015 the authorities will phase-in
reforms that would deliver estimated permanent savings of ¼-½
percent of GDP in 2015 and 1 percent of GDP on a full year basis in
2016 and thereafter by adopting legislation to:
create strong disincentives to early retirement, including the
adjustment of early retirement penalties, and through a gradual
elimination of grandfathering to statutory retirement age and early
retirement pathways progressively adapting to the limit of
statutory retirement age of 67 years, or 62 and 40 years of
contributions by 2022, applicable for all those retiring (except
arduous professions, and mothers with children with disability)
with immediate application;
adopt legislation so that withdrawals from the Social Insurance
Fund will incur an annual penalty, for those affected by the
extension of the retirement age period, equivalent to 10 percent on
top of the current penalty of 6 percent;
integrate into ETEA all supplementary pension funds and ensure
that, starting January 1, 2015, all supplementary pension funds are
only financed by own contributions;
better target social pensions by increasing OGA uninsured
pension;
Gradually phase out the solidarity grant (EKAS) for all
pensioners by end-December 2019. This shall be legislated
immediately and shall start as regards the top 20% of beneficiaries
in March 2016 with the modalities of the phase out to be agreed
with the institutions;
freeze monthly guaranteed contributory pension limits in
nominal terms until 2021;
provide to people retiring after 30 June 2015 the basic,
guaranteed contributory, and means tested pensions only at the
attainment of the statutory normal retirement age of currently 67
years;
increase the health contributions for pensioners from 4% to 6%
on average and extend it to supplementary pensions;
phase out all state-financed exemptions and harmonize
contribution rules for all pension funds with the structure of
contributions to IKA from 1 July 2015;
Moreover, in order to restore the sustainability of the pension
system, the authorities will by 31 October 2015, legislate further
reforms to take effect from 1 January 2016; (i) specific
design and parametric improvements to establish a closer link
between contributions and benefits; (ii) broaden and modernize the
contribution and pension base for all self-employed, including by
switching from notional to actual income, subject to minimum
required contribution rules; (iii) revise and rationalize all
different systems of basic, guaranteed contributory and means
tested pension components, taking into account incentives to work
and contribute; (iv) the main elements of a comprehensive SSFs
consolidation, including any remaining harmonization of
contribution and benefit payment rules and procedures across all
funds; (v) abolish all nuisance charges financing pensions and
offset by reducing benefits or increasing contributions in specific
funds to take effect from 31 October 2015; and (vi) harmonize
pension benefit rules of the agricultural fund (OGA) with the rest
of the pension system in a pro rata manner, unless OGA is merged
into other funds. The consolidation of social insurance funds will
take place by end 2017. In 2015, the process will be activated
through legislation to consolidate the social insurance funds under
a single entity and the operational consolidation will have been
completed by 31 December 2016. Further reductions in the operating
costs and a more effective management of fund resources including
improved balancing of needs between better-off and poorer-off funds
will be actively encouraged.
The authorities will adopt legislation to fully offset the
fiscal effects of the implementation of court rulings on the 2012
pension reform.
In parallel to the reform of the pension system, a Social
Welfare Review will be carried out to ensure fairness of the
various reforms.
The institutions are prepared to take into account other
parametric measures within the pension system of equivalent effect
to replace some of the measures mentioned above, taking into
account their impact on growth, and provided that such measures are
presented to the institutions during the design phase and are
sufficiently concrete and quantifiable, and in the absence of this
the default option is what is specified above.
5. Public Administration, Justice and Anti
Corruption
Adopt legislation to:
reform the unified wage grid, effective 1 January, 2016,
setting the key parameters in a fiscally neutral manner and
consistent with the agreed wage bill targets and with comprehensive
application across the public sector, including decompressing the
wage distribution across the wage spectrumin connection with the
skill, performance and responsibility of staff. (The authorities
will also adopt legislation to rationalise the specialised wage
grids, by end-November 2015);
align non-wage benefits such as leave arrangements, per diems,
travel allowances and perks, with best practices in the EU,
effective 1 January 2016;
establish within the new MTFS ceilings for the wage bill and
the level of public employment consistent with achieving the fiscal
targets and ensuring a declining path of the wage bill relative to
GDP until 2019;
hire managers and assess performance of all employees (with the
aim to complete the hiring of new managers by 31 December 2015
subsequent to a review process)
introduce a new permanent mobility scheme applied by Q4 2015.
The scheme will promote the use of job description and will be
linked with an online database that will include all current
vacancies. Final decision on employee mobility will be taken by
each service concerned. This will rationalize the allocation of
resources as well as the staffing across the General
Government.
reform the Civil Procedure Code, in line with previous
agreements; introduce measures to reduce the backlog of cases
in administrative courts; work closely with European institutions
and technical assistance on e-justice, mediation and judicial
statistics
strengthen the governance of ELSTAT. It shall cover (i) the
role and structure of the Advisory bodies of the Hellenic
Statistical System, including the recasting of the Council of ELSS
to an advisory Committee of the ELSS, and the role of the Good
Practice Advisory Committee (GPAC); (ii) the recruitment procedure
for the President of ELSTAT, to ensure that a President of the
highest professional calibre is recruited, following transparent
procedures and selection criteria; (iii) the involvement of ELSTAT
as appropriate in any legislative or other legal proposal
pertaining to any statistical matter; (iv) other issues that impact
the independence of ELSTAT, including financial autonomy, the
empowerment of ELSTAT to reallocate existing permanent posts and to
hire staff where it is needed and to hire specialised scientific
personnel, and the classification of the institution as a fiscal
policy body in the recent law 4270/2014; role and powers of Bank of
Greece in statistics in line with European legislation.
Publish a revised Strategic Plan against Corruption by 31 July
2015. Amend and implement the legal framework for the declaration
of assets and financing of the political parties and adopt
legislation insulating financial crime and anti-corruption
investigations from political intervention in individual
cases.
Moreover, in collaboration with the OECD, the Authorities
will:
Strengthen controls in public entities and especially SOEs.
Empower the Line Ministries to perform robust audit and control
inspections to supervised entities including SOEs.
Strengthen controls and internal audit processes in high
spending Local Government Institutions and their supervised legal
entities.
Strengthen controls in public and private investment cases
funded either by national or co-funded by other sources, public
works and public procurement (e.g. in health sector, SDIT).
Strengthen transparency and control processes and skills in tax
and customs authorities.
Assess major risks in the public procurement cycle, taking in
consideration the recent developments (Central Purchasing and
e-Procurement: KHMDHS and ESHDHS) and the need to have a clear
governance framework. Develop strategy according to the
assessment(Q4 2015)
Implement strategy to mitigate public procurement risks.(Q1
2016)
Assess 2 specific sectors, Health and Public Works in order to
understand the existing constrains related to corruption and waste
risks and propose measures to address them. Develop and implement
strategy. (Q4 2015)
6. Tax administration
Take the following actions to:
Adopt legislation to establish an autonomous revenue agency,
that specifies: (i) the agency’s legal form, organization, status,
and scope; (ii) the powers and functions of the CEO and the
independent Board of Governors; (iii) the relationship to the
Minister of Finance and other government entities; (iv) the
agency’s human resource flexibility and relationship to the civil
service; (v) budget autonomy, with own GDFS and a new funding
formula to align incentives with revenue collection and guarantee
budget predictability and flexibility; (vi) reporting to the
government and parliament; and (vii) the immediate transfer of all
tax- and customs-related capacities and duties and all tax- and
customs-related staff in SDOE and other entities to the
agency.
on garnishments, adopt legislation to eliminate the 25 percent
ceiling on wages and pensions and lower all thresholds of €1,500
while ensuring in all cases reasonable living conditions;
accelerate procurement of IT infrastructure to automatize
e-garnishment; improve tax debt write-off rules; remove tax
officers’ personal liabilities for not pursuing old debt; remove
restrictions on conducting audits of tax returns from 2012 subject
to the external tax certificate scheme; and enforce if legally
possible upfront payment collection in tax disputes.
amend (i) the 2014–15 tax and SSC debt instalment schemes to
exclude those who fail to pay current obligations and introduce a
requirement for the tax and social security administrations to
shorten the duration for those with the capacity to pay earlier and
introduce market-based interest rates; the LDU and KEAO will assess
by September 2015 the large debtors with tax and SSC debt exceeding
€1 million (e.g. verify their capacity to pay and take corrective
action) and (ii) the basic instalment scheme/TPC to adjust the
market-based interest rates and suspend until end-2017 third-party
verification and bank guarantee requirements.
adopt legislation to accelerate de-registration procedures and
limit VAT re-registration to protect VAT revenues and accelerate
procurement of network analysis software; and provide the
Presidential Decree needed for the significantly strengthening the
reorganisation of the VAT enforcement section in order to
strengthen VAT enforcement and combat VAT carousel fraud. The
authorities will submit an application to the EU VAT Committee and
prepare an assessment of the implication of an increase in the VAT
threshold to €25.000.
combat fuel smuggling, via legislative measures for locating
storage tanks (fixed or mobile);
Produce a comprehensive plan with technical assistance for
combating tax evasion which includes (i) identification of
undeclared deposits by checking bank transactions in banking
institutions in Greece or abroad, (ii) introduction of a
voluntary disclosure program with appropriate sanctions, incentives
and verification procedures, consistent with international best
practice, and without any amnesty provisions (iii) request from EU
member states to provide data on asset ownership and acquisition by
Greek citizens, (iv) renew the request for technical assistance in
tax administration and make full use of the resource in capacity
building, (v) establish a wealth registry to improve
monitoring.
develop a costed plan for the promotion of the use of
electronic payments, making use of the EU Structural and Investment
Fund;
Create a time series database to monitor the balance sheets of
parent-subsisdiary companies to improve risk analysis criteria for
transfer pricing
7. Financial sector
Adopt: (i) amendments to the corporate and household
insolvency laws including to cover all debtors and bring the
corporate insolvency law in line with the OCW law; (ii) amendments
to the household insolvency law to introduce a mechanism to
separate strategic defaulters from good faith debtors as well as
simplify and strengthen the procedures and introduce measures to
address the large backlog of cases; (iii) amendments to improve
immediately the judicial framework for corporate and household
insolvency matters; (iv) legislation to establish a regulated
profession of insolvency administrators, not restricted to any
specific profession and in line with good cross-country experience;
(v) a comprehensive strategy for the financial system: this
strategy will build on the strategy document from 2013, taking into
account the new environment and conditions of the financial system
and with a view of returning the banks in private ownership by
attracting international strategic investors and to achieve a
sustainable funding model over the medium term; and (vi) a holistic
NPL resolution strategy, prepared with the help of a strategic
consultant.
8. Labour market
Launch a consultation process to review the whole range of
existing labour market arrangements, taking into account best
practices elsewhere in Europe. Further input to the consultation
process described above will be provided by international
organisations, including the ILO. The organization and timelines
shall be drawn up in consultation with the institutions. In this
context, legislation on a new system of collective bargaining
should be ready by Q4 2015. The authorities will take actions to
fight undeclared work in order to strengthen the competitiveness of
legal companies and protect workers as well as tax and social
security revenues.
9. Product market
Adopt legislation to:
implement all pending recommendations of the OECD
competition toolkit I, except OTC pharmaceutical products,
starting with: tourist buses, truck licenses, code of conduct for
traditional foodstuff, eurocodes on building materials, and all the
OECD toolkit II recommendations on beverages and petroleum
products;
In order to foster competition and increase consumer welfare
immediately launch a new competition assessment, in collaboration
and with the technical support of the OECD, on wholesale trade,
construction, e-commerce and media. The assessment will be
concluded by Q1 2016.The recommendations will be adopted by Q2
2016.
open the restricted professions of engineers, notaries,
actuaries, and bailiffs and liberalize the market for tourist
rentals ;
eliminate non-reciprocal nuisance charges and align the
reciprocal nuisance charges to the services provided;
reduce red tape, including on horizontal licensing requirements
of investments and on low-risk activities as recommended by the
World Bank, and administrative burden of companies based on the
OECD recommendations, and (ii) establish a committee for the
inter-ministerial preparation of legislation. Technical assistance
of the World Bank will be sought to implement the easing of
licensing requirements.
design electronic one-stop shops for businesses through
analysing information obligations businesses have to comply with,
structuring them accordingly and helping to design a project on
developing the necessary ICT tools and infrastructure (Q3 2015).
Setting up the institutional & co-ordination structure,
identification of the business life events to be included,
identification and mapping of information obligations &
administrative procedures and training of officials (Q4 2015).
Launch (Q1 2016)
adopt the reform of the gas market and its specific roadmap,
and implementation should follow suit.
take irreversible steps (including announcement of date for
submission of binding offers) to privatize the electricity
transmission company, ADMIE, or provide by October 2015 an
alternative scheme, with equivalent results in terms of
competition, in line with the best European practices to provide
full ownership unbundling from PPC, while ensuring
independence.
On electricity markets, the authorities will reform the
capacity payments system and other electricity market rules to
avoid that some plants are forced to operate below their variable
cost, and to prevent the netting of the arrears between PPC and
market operator; set PPC tariffs based on costs, including
replacement of the 20% discount for HV users with cost based
tariffs; and notify NOME products to the European Commission. The
authorities will also continue the implementation of the roadmap to
the EU target model prepare a new framework for the support of
renewable energies and for the implementation of energy efficiency
and review energy taxation; the authorities will strengthen the
electricity regulator’s financial and operational independence;
10. Privatization
The Board of Directors of the Hellenic Republic Asset
Development Fund will approve its Asset Development Plan which will
include for privatisation all the assets under HRDAF as of
31/12/2014; and the Cabinet will endorse the plan.
To facilitate the completion of the tenders, the authorities
will complete all government pending actions including those needed
for the regional airports, TRAINOSE, Egnatia, the ports of Pireaus
and Thessaloniki and Hellinikon (precise list in Technical
Memorandum). This list of actions is updated regularly and the
Government will ensure that all pending actions are timely
implemented.
The government and HRADF will announce binding bid dates for
Piraeus and Thessaloniki ports of no later than end-October 2015,
and for TRAINOSE ROSCO, with no material changes in the terms of
the tenders.
The government will transfer the state's shares in OTE to the
HRADF.
Take irreversible steps for the sale of the regional airports
at the current terms with the winning bidder already
selected."
* * *
And the market being incapable of comprehending that this will
never be passed by either The Troika or The Greek government
explodes higher...
