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The expert Troika with a view to the 2011 budget

13 September 2010 / 16:09:55  GRReporter
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The mission of the International Monetary Fund, the European Central Bank and the European Commission is once again in Athens. Its representatives will meet consistently employees of key Greek ministries. They will also check the Audit Court, Bank of Greece, the National Statistical Service of Greece. Commissioners will consider in detail the development of the Greek economy but this time will pay particular attention to the preparation of the 2011 budget.
 
Their first meetings are with representatives of the Ministry of Finance and the Bank of Greece on Tuesday, September 14 to determine the basis of the state financial plan for the next year. Delays in revenue collection in the Treasury is a problem that financial experts should decide immediately to meet the objectives set out in the Memorandum of financial aid. The next year economic policy of the government should ensure the deficit of the country would drop to 7.6 percent of GDP starting to implement measures at the same time to return to positive growth and production. This year's cuts in salaries and pensions as well as raising taxes and excise duties were introduced to guarantee the decline in domestic deficit from 13.7 percent of GDP for 2009 to 8.1 percent of GDP at the end of 2010. The government still has three months and a half to achieve this difficult goal. Recession and sharp shrinkage of economy, however, proved decisive for the flow of revenue in the country. Reduced consumption led to lower collection of taxes and fees that disrupted the balance planned at the beginning of the year.  
 
One of the steps in improving the business climate was the reduction of undistributed profits tax from 24% to 20%. This announced the Prime Minister George Papandreou at a press conference during the International Trade Fair in Thessaloniki over the weekend. The Ministry of Finance announced after the introduction of the tax reform at the beginning of the year that the tax on undistributed profits for 2010 will be 24% and it will gradually be reduced by one percentage point per year to freeze to 20% in 2013. According to the changes the Prime Minister announced, the tax on undistributed profits in the fiscal 2011 will be 20%. However, economic experts estimate that the government should devote more efforts to restore the credibility in the local economy. The union of Greek traders came up with an official release in support of the change, but noted that 20 % tax on undistributed profits would benefit only large companies and it will not have significant effect on the activities of small and medium business.

Higher taxes and the still slowly operating administrative system have made Greece extremely unattractive for new investments. At the same time, reforms in the country raised series of protests, such as those of the carriers, government officials and almost all trade unions. They declared themselves against the market liberalization and the changes in tax policy. The Financial Minister George Papakonstantinou leaves on a road show on Tuesday night to improve the broken image of the country. He will visit three European cities to meet potential international investors to present the achievements of today's government and convince the business circles of the old continent that Greece has gone along  the way of economic stability. The Greek Financial Minister will stop first in London, where he will also meet the heads of the mission – the representative of EC Servaas Deroose, the IMF representative for Europe Poul Thomsen and Klaus Masuch from the European Central Bank. Their presence at the meetings in the three European cities should inspire a sense of security in the power of the Greek economy. The representative group will visit Paris and Frankfurt after London and will be back in Athens on Friday, September 17. According to unconfirmed information, the leaders of the mission will return with the Minister George Papakonstantinou in the Greek capital to complete the checks in state institutions and help the government build the action plan for next year.  

The mission will complete this visit on September 21. It will make clear the conditions under which Greece will receive the final installment of nine billion euros of the financial aid for 2010. The issues in healthcare, the banking sector reform, the social insurance funds and the market liberalization are also part of the talks and the Greek government has to include them in the rescue program and solve them. The preparation of the privatization program is expected by the end of this year. It will help the inefficient government revenue as the Greek Railways with their accumulated deficit of € 10 billion are on the first line of privatization as well as the public transport organizations with a loss around € 2.6 billion.

 

Tags: EconomyMarketsCrisisExpert TroikaIMFECECB
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