Troika raises the “bill” to 13.5 bil. euros

The new measures that will hit households and SMEs will come in two waves. "The package of cuts of 11.5 billion can be closed even today," at the Troika meeting at 4 in the afternoon or Sunday-Monday at the latest before the Troika’s departure, as reported by a member of the Finance ministry.             

 

So, the auditors stopped pushing for further reductions in wages and pensions, but also expect new tax collection measures to bring another 2 billion euros into the state coffers, in line with what was laid out in memorandum II. If all this gets confirmed in today's meeting, it will pave the way for the adoption of the measures in early October.

 

 

The Troika heads came out of yesterday's meeting with Yannis Stournaras at midnight. As it seems, all measures will be concluded no later than Sunday or Monday, leaving only the approval of the political leaders and heads of auditors.

 

The government insists and the Troika seems to agree not to exceed 7.5 billion euros in cuts in wages and pensions. "There is no more pressure on wages and pensions" said a member of the economic team. Stournaras had been clear about his position since yesterday, when pressured by Thomsen for new pay cuts, saying “I’m not signing, I’m going to leave the government.”

 

With the new data it seems that the package of 11.5 billion will close without horizontal wage cuts for the narrow public sector (about 5%) and reductions in pensions of 600 euros gross and cuts in the minimum pension of IKA and OGA. It will include other measures for wages and pensions, amounting to 7.5 billion euros. Among other things, it will provide for:

 

-          increasing the retirement age to 67

-          elimination of the remainder of the 13th and 14th salaries in the public sector

-          elimination of the 13th and 14th pensions for all pensioners

-          decrease of 1% -20% in pensions (main and supplementary) from 1.000 euros upwards

-          elimination of the 13th and 14th main and supplementary pensions (Christmas, Easter bonuses and holiday pay), in both the public and private sectors

-          cuts in special payrolls (average reduction of 12%)

-          extension of the single payroll to SOEs as well

-          cuts in seasonal/special unemployment benefits (tourism professions, builders, etc.)

-          reduction in pharmaceutical expenditure of social security funds and hospitals

-          slashing disability allowances

-          elimination of EKAS for those below 65

-          social benefits only under very low income and assets criteria

 

 

Troika is also overseeing the tax reform the finance ministry is preparing for next month. According to the plan the State must receive 2 billion euros through measures such as:

 

-          new graduated hike for those who collect rent from properties

-          changing the scale of the income tax of freelancers at a rate ranging from 20% to 30%

-          reducing tax brackets of individuals that will most likely burden small and medium incomes

-          reducing the overall tax burden of businesses, wage earners and pensioners, with a single tax rate for all businesses

 

The new system eliminates what was applicable for freelancers and individual enterprises. They will be taxed at a uniform tax rate of 30%, initially to be gradually reduced to 20%, without a tax free limit. Today, professionals are taxed under the income tax bracket with a tax free limit of 5,000 euros and rates start at 10%, reaching 45%.

 

 

The new rate for freelancers will be the new maximum rate for wage earning retirees, opening a window for a decrease of 30%.

 

But there will be changes in the income tax bracket on a broader scale. Today it has 8 levels, but in the new one they will be limited to 3 to 4.

 

All businesses will be taxed on a "revenue minus expenses" system with elimination of separate taxation. Only non-business-owning active farmers might be excluded but they will be caught by the poll tax. Officials are discussing a proposal to impose a poll tax of 150 euros on those who receive income from rent, professionals, businesses and individual taxpayers who might not be professional farmers but they receive income from farming.