The Greek economy – the way forward
After marathon talks, EU leaders at last reached an agreement to pave the way for a third bailout for Greece, should the Athens parliament approve strict austerity measures. The Financial Times called this “the most intrusive economic supervision programme ever mounted in the EU”. However, Greece’s parliament must approve these measures for their economy by Wednesday (15 July). Should an agreement be reached, it will mean a three-year bailout for the Greek economy worth up to £61 bn, accompanied by further monitoring by Greece’s creditors.
The austerity measures for Greece include:
— Further reform to the tax and pension system. To increase the tax revenue base the “VAT system must be streamlined”. One of the key objections to Greece’s current VAT system is the 30% discount Greek islands receive. The exemptions of these islands will end, starting with the largest of the tourist islands. It is also quite likely that more items will now be covered by the top VAT rate, which is 23%
— Liberation of the labour market, including the opening of closed professions
— Laws regarding Sunday trading must be relaxed
— The pension system’s long-term sustainability must be improved and the retiring age in Greece raised to 67 years
— Greece must also introduce into their economy “quasi-automatic spending cuts” if it should “deviate from primary surplus targets
— Up to £35 bn Greek assets will be transferred to an independent fund, which will monetise it. These assets are likely to include planes, airports, infrastructure, and banks
— Debts must be further restructured
— Greece must also privatize their energy transmission network
However, before Greece can receive the bailout money, they have to repay some £7 bn to the European Central Bank (ECB). Greece will also need to request continued support from the IMF, and this will be from March 2016. Stock markets welcomed the tentative deal, but all eyes will still be on Greece and their floundering economy in the coming months.