Greek Finance Minister Euclid Tsakalotos is expected to add details to his letter to creditors — sent this week — ahead of the Eurogroup meeting on Thursday, according to sources close to the minister.
“The (Greek) government, via the letter by FinMin Euclid Tsakalotos, briefed the Institutions (Greece’s creditors) that he will arrive at the Jan. 26 Eurogroup with specific positions on outstanding issues,” is the way one government source described the situation.
Tsakalotos’ letter to creditors is the second within a month, following a Christmas Eve written promise not to undertake another unscheduled spending measure without prior consultation. The Tsipras government withdrew a 617-million-euro chunk out of state coffers late last month for a one-off “holiday bonus” to 1.6 million pensioners. Beneficiaries included anyone earning less than 850 euros a month in social security benefits, regardless of assets, property etc.
While no details were listed in the second letter, repeated “leaks” and indirect statements by government officials over the recent period point to an acceptance of fiscal targets after 2018, among others.
In the face of IMF demands for legislation — ratified now — that specifies the measures, the leftist Tsipras government has countered with the extension of an automatic spending cuts mechanism. The duration of the mechanism, dubbed the “cutter”, remains to be negotiated, according to the government side.
Athens’ preferred outcome would be a one-year extension of the mechanism, whereas creditors — especially the Eurozone’s ‘paymaster’, Germany — wants up to decade of guarantees that fiscal targets will be met.
An extended version of the “cutter”, if the compromise is achieved, is expected to contain two standing demands requested by the IMF, which government critics and the media say are thinly veiled new austerity measures: an automatic reduction in the current tax-free threshold (roughly 8,500 euros) enjoyed by wage-earners and self-employed professionals; and a harmonization (downwards) of pension rates between various castes of beneficiaries — a measure that could possibly slice off up to four billion euros in annual social security outlays.
