Dialogue on the measures …antidote to Merkel

Dialogue on the measures …antidote to Merkel

New expense cuts and increases in tax revenue are the answer to the German proposal for constitutional clauses to ban deficits

The government is taking the initiative for a dialogue to ask for a consensus from bodies and political parties for the proper measure mix of 2012-2015 demanded by the Troika. According to the intentions of the financial staff the measures will have to relate by 2/3 to new cuts in state expenses and by 1/3 to further increases of public revenue.

The plan, as presented by Papakonstantinou in the cabinet meeting, provides for new austerity measures in order to create ever-increasing primary surpluses in the state budget from 2012 onwards.

According to the estimates of the ministry, the deficit will fall from 3% in 2013 to 2,6% in 2014 and 1,5% in 2015, but the primary surpluses to reduce debt will run at 5% after 2014 and at least until 2020.

However, at this stage the government wants to avoid being committed to specific measures that will ultimately be taken in May after the dialogue that will begin immediately. The measures will be included in the bill and will be voted on. The government already wants to promote the bill as a response to Merkel's proposal to impose a constitutional clause prohibiting deficits and a new covenant of Competitiveness.

They think that it will send a message to the markets about the continuous intense effort for primary surpluses and deficit decrease within the timetable set by the Troika. And they seek the broadest possible consensus because they believe that the new law on 2012-2015 measures will ensure the commitment of the New Democracy party as the opposition, but perhaps also as the government in the future.

The financial staff, however, believes that the extension of measures for another year, until 2015, means that the new measures of the period will not burden ctizens immediately and unduly, since they will last one more year (along with the supervision).

In any case the package of measures fro which Papaconstantinou informed the cabinet today will include:

    * 1,5bil revenue from consumer taxes, tax evidence and real estate
    * 450mil from expense cuts AND increases in SOE invoices
    * 650mil from cuts in several allowances
    * 1,5bil from hiring reductions and the enforcement of the Unified Payroll
    * 500mil from the restructuring of local authorities
    * 600mil from overdue debts
    * 150mil from green taxes
    * 500mil from cuts in the Public Investment Program
    * 1,5bil from privatizations
    * and 2,5 more from the fight against tax evasion.

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