Greek government to impose a “general cutter”

2 December 2016
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In hopes to dispel any rumours of a negative outcome of Monday’s EuroGroup meeting and appease the markets and possible investors in the Greek economy, the Greek government is signalling that it is close to an agreement with its creditors on the completion of the second review on the Greek bailout program. At this juncture the most likely scenario is that the December 5 EuroGroup meeting will only be one step in reaching a deal on the second review and not the much desired full agreement the government hopes for, as the participation of the IMF on the program is stop up in the air. A government source said that the second review would close without the imposition of any new measures, stressing that the claims by major opposition leader Kyriakos Mitsotakis that the negotiations were uncertain would be disproven. The Greek government has already proceeded to adopt measures that would close the 2018 fiscal gap, satisfying the European part of the creditors, while the issues of mass layoffs and collective bargaining are still pending. At the same time ii is exploring ways to meet the lenders’ demands for high GDP surplus targets for 2019 and 2020 in such a way that it can avoid specifying the measures. According to sources, the government is prepared to introduce the “cutter”, as was done ion the previous review, in order to achieve the agreed upon targets in the event it fails to reach a 3.5% GDP surplus for the two years. In this way it is trying to avoid the pressure by the IMF of imposing more austerity measures for that period, while assuaging public concerns that the fiscal gap will be covered through a rise in revenue and growth instead of more spending cuts or tax hikes. The government wants a deal in December to avoid prolonging economic volatility and thus be included in the ECB’s quantitative easing plan.

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