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Negotiations with the creditors deadlocked once again

07 November 2015 / 22:11:49  GRReporter
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Throughout the weekend, the Greek government will have consultations with the institutions in an attempt to align its positions with theirs on contentious issues. The reason behind the discussions is the Eurogroup meeting on Monday.

Reportedly, the creditors have dug in their heels and are putting pressure on the government. The likelihood of clearing the €2 billion tranche is small. Representatives of the institutions believe that Eurogroup will come up with a positive opinion on progress, but if the tranche were to be released laws will be expected on all required measures.

The stalemate took hold yesterday, when despite expectations no agreement was reached on key issues such as tenders for debtors' properties or finding substitutes for the 23% VAT on private education.

The following subjects, which are still open, should be closed by Monday:

1. Measures equivalent to the 23% VAT on private education. The most likely scenario still is the imposition of a tax on gambling. It is believed that revenues of €330 million might be generated through the tax. The proposals for substituting measures, including the gambling tax option, have reportedly been sent to the institutions. Yet new talks have been scheduled between government representatives and the management of the public sweepstake operator OPAP. The latter reacted angrily over the likelihood of steeper taxes on the games of chance. There are legal issues that must be addressed as well.

2. Tenders for primary residences of debtors. The government's position is far off the creditors' one. The Greek side has reiterated that first homes worth €200,000 (for single persons) and €250,000 (for couples) should come under protection. Sums of €25,000 per child should be added on top of that, but for no more than 3 children. Athens is also reluctant to bring down the €35,000 per year income limit. Its argument is that if it did this would have affected a large portion of households with small and medium incomes. Debtors owing up to €200,000 are also in the protected list. It is believed that this will shield about 50% of debtors on the whole, thus achieving a "fair compromise." The creditors' plans allow protection for only 20% of debtors. The government proposes that arrangements for the sale of primary residences be reviewed over a certain period. The concrete proposal is that conditions and criteria be revisited in 2017 or 2018. And subsequently turn this into a pattern.

3. Amending the 100 instalments tax payment scheme. The creditors insist on repealing the provision, which says that debtors will be kicked out of the scheme if they failed to pay their instalment within 26 days. They want this term down to one day. The government believes this is too harsh and instead offers that everyone can (regardless of whether they have arrears or not) be put on a 12-instalment scheme. The possibility of a gradual reduction of the 26-day period – in line with economic performance – is being scrutinised.

4. Minimum prices of medicines. The creditors want no limits on minimum prices of expired-patent and generic medicines. The government, for its part, proposes reducing the current minimum prices incrementally, within a two-year period.

Tags: Eurogroup negotiations creditors contentious issues VAT substitution measures minimum prices of medicines 100 instalments tax payment scheme
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