"Yes" to the automatic correction of deviations
The Greek government and its lenders are looking for an agreement point by tomorrow...
After the meetings at Maximos Mansion, today the government will close four open fronts with the lenders by submitting two new legislative acts in parliament, with all the terms the Troika has setas prerequisites for the tranche, but were absent from the package of measures that was passed last Wednesday.
The new legislative acts will contain:
- autocorrect clause: in any deviation against the deficit targets, there will be automatic cuts from primary expenditure excluding salaries, pensions and allowances. Also, for every failure in privatization revenues for two consecutive quarters, there will be cost cutting of 50% by general government bodies
- redundancy program in the public sector: provides for a quarterly rate of retirements for civil servants who will be suspended between 2013 and 2015. The Troika essentially asks for the first 5,000 employees who will be suspended in 2013
- special account: the Troika wants to have supervision over the special account that will be activated to receive the 44.5 billion euros in December, depending on the amount of the tranche that will be released to Greece
- imposition of commissioners in the public sector: to avoid pressure from the Troika, the government imposes a mechanism under the absolute control of the Finance ministry. The course of ministries and agencies will be monitored quarterly. For local authorities it provides the set up for a monitor of financial independence, which in case of deviations of more than 10% will require a tax increase for citizens, an up to 0.3% increase of TAP on properties within the municipality, mandatory staff transfers, expenditure reduction, etc.
But even if public utilities show discrepancies of 10% or more, they will be put under the inspection of financial supervisors to ensure the achievement of the memorandum objectives. They will give the order for corrective measures within three months, otherwise they will automatically cut off funds, grants and salaries from members of the Board or force them to resign if they do not obey.
Meeting of the IMF and the EU as well
The IMF and the EU are also one step closer to an initial agreement, paving the way for the immediate disbursement of the tranche for Greece. Reports say that pending the debt sustainability report, both sides found common ground after the IMF withdrew the new haircut, provided that the set of alternatives will be able to fill the void.
Thus, the new package will include drastic reduction or even zero interest rates on Troika loans, renouncing ECB profits from Greek bonds and the return of those profits to Greece by the central banks of the Eurozone member-states, the extension of the maturity period for the debt, etc.
There are also thoughts of a plan to repurchase bonds, although as emphasized by domestic and international analysts, this idea has a high degree of difficulty and therefore requires capital financing from Greece’s lenders.
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