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The 128-page agreement sent by the EU & IMF to the Greek government

New measures of 450 million Euros from 2018 to tax cuts – Reduction of unemployment, poverty and heating benefits

This is the new agreement between the lenders and Greece, totaling 128 pages, the terms of which will be included in the bills expected to be voted on in the Parliament. The government is planning a parliamentary crash test in the first ten days of May, so that the Eurogroup on May 22 will have at least a ratification of the staff level agreement.

The texts are in the form of the final draft (almost agreed) and are not expected to change significantly, although some of them may still be the subject of negotiations. The agreement is made of the following texts:

The IMF’s Memorandum of Economic and Financial Policies (MEFP) and the Technical Memorandum accompanying it (TMU).

The Supplementary Memorandum of the European Side (SMoU) and its technical section (TMU) respectively. The new memorandums include everything: the new fiscal measures of the 2018-2020 trio (allowances – pensions – debts), public sector reforms, labor and product market changes, bank policy, privatizations and energy. There is also a list of countermeasures and how they will be activated. The key points are:

1. Measures of 450 million Euros from 2018 with cuts in unemployment benefits, children, poverty and natural disasters, support for families and a further 58 million Euros reduction in heating allowance. At the same time, it is planned to abolish the tax deduction for medical expenses, which will increase the tax burden for the people by 121 million Euros.

2. Public Sector: 1.028 people working on contracts will be laid off. At the request of the IMF a “ceiling” is imposed on the number of contract staff. Their number is not only allowed to increase but has to be reduced from 49.448 in December 2016 to 49.104 in the same month of 2017 and to 48.420 in December 2019. At the same time the IMF Memorandum requires legislation to defend transparency and mobility, as well as the completion of reforms (and thus new cuts) for special wages. The ratio of one recruitment for every five departures will be one to three in 2018 if the budgetary targets are met.

3. Countermeasures only with a 3,7% primary surplus! Contrary to what we have known so far, the IMF’s technical text states that countermeasures will be implemented not when the government achieves the target of a primary surplus of 3,5% of GDP, but only if there is a margin of 0,2% above 3,5%. So the threshold  automatically rises to 3,7%.