Growth model: Tax reductions, measures for the unemployed

The draft growth model is named “Greece 20121: The new national development model” and is based on nine sectors. It signals tax reductions, firstly on business profits and then in social security contributions, energy and individuals as well as guaranteed income for the unemployed.

According to sources, the draft was received positively by Brussels officials. It is based on nine sections and calls for a radical change in the country's production structure.

“9 sectors”

-Tourism
-Primary production and processing of agricultural products
-Energy
-Transit trade and combined transports
-Research, technology and innovation

-Pharmaceuticals industry
-Metals and construction materials industry
-Shipping and related activities
-Tradeable services

13 horizontal policies

According to the document, “the Greek government has already planned and is implementing structural changes and horizontal policies” with an emphasis on 13 actions:

1. Improvement of fiscal indicators
2. Creating a climate favourable to investing and facilitating commercial activity
3. Limiting unethical competition and supporting competitiveness
4. Utilising public property and privatisations
5. Facilitating international trade and extroversion
6. Taxation policy
7. Flexibility and security in the labour market
8. Emphasis on innovation
9. Restructuring public administration and improving citizens' services
10. Investing in human capital
11. Fighting corruption and strengthening trustworthiness and transparency
12. Accelerating and improving the meting out of justice
13. Strengthening social cohesion

Funding

The document notes that investment funding requires:

- the existence of significant savings
- the attraction of private funding mostly from abroad, mainly direct but also indirect funding.

Also, according to the document “the main actions needed to achieve greater effectiveness” include: 

-Activation and absorption of capital available to SMEs, by the end of 2015
-Front-loaded and targeted planning of funding tools for the new funding programme period
-Maximising the involvement of the European Investment Bank.

Tax reduction

Among other things, the plan foresees “the difficulty of reducting tax rates” under present circumstances. However, it mentions that “as the economy improves and tax evasion measures continue to provide results, the gradual reduction of tax rate will be implemented.”

The plan would encourage “targeted actions promoted in order to 'relieve' the tax burden in specific economic activities such as research and development, including the gradual reduction of tax rates for individuals.

New production structure

In conclusion, the document expressed the hope that “in one decade Greece's production structure will have changed radically. Significant funds will be directed towards investments rather than consumption, jobs will have increased significantly and a great portion of the manufactured product will be exported, while there will be convergence with eurozone member-states that will be based on healthy economic bases.”

The model has been based on studies carried out by the Centre for Programming and Economic Research (KEPE), the Foundation for Economic and Industrial Research (IOBE) and McKinsey consultants. It was finalised in outline on Tuesday by Finance Minister Yannis Stournaras, Development Minister Costis Hatzidakis, advisor to the prime minister Chryssanthos Lazaridis and officials of PASOK.

It is expected to be presented in greater detail by Stournaras to the Eurogroup on May 5.