Troica Demands Deep Public Sector Cuts, Higher Taxes As Part Of Greek Bailout #2, Or My Big Fat Greek Anschluss

Tyler Durden's picture

So here it is:

  • EU, IMF: GREECE NEEDS TO REINVIGORATE STRUCTURAL REFORMS (so, fire more people and generate more GDP with whoever is left?)
  • EU, IMF: GREECE TO REDUCE TAX EXEMPTIONS, RAISE PROPERTY TAXES (So, generate more GDP by taxing people more?)
  • EU, IMF: `AMBITIOUS' MID-TERM PLAN, WILL MEET 2011-2015 TARGETS (If the targets are all Greek bankruptcy, yes)

And now, the people get angry. Expect live webcast from Syntagma square shortly.

Full release:

3 June 2011 - Statement by the European Commission, the ECB and the IMF on the Fourth Review Mission to Greece

Staff teams from the European Commission (EC), European Central Bank
(ECB), and International Monetary Fund (IMF) have concluded a mission to
Greece to discuss recent economic developments and policies needed to
keep the country’s economic program on track. The mission has reached
staff-level agreement with the authorities on a set of economic and
financial policies needed to meet program objectives. Strict
implementation of these will help to restore fiscal sustainability,
safeguard financial sector stability, and boost competitiveness to
create the conditions for sustained growth and employment.

Overall, significant progress, in particular in the area of fiscal
consolidation, has been achieved during the first year of the adjustment
program. However, reinvigoration of fiscal and broader structural
reforms is necessary to further reduce the deficit and achieve the
critical mass of reforms needed to improve the business climate and pave
the way for sustainable economic recovery.

Regarding the
outlook, the recession in 2010 was slightly more
pronounced than what was anticipated. But there have been encouraging
signs recently, in particular a notable pick-up in exports. Unit labour
costs are set to decline further, supporting the strong export dynamics,
and inflation is on a declining trend. We expect the economy to
stabilize at the turn of the year.

In the
fiscal area, further sustained deficit reduction will
require comprehensive fiscal structural reforms. The government has
committed to an ambitious medium-term fiscal strategy that will enable
it to maintain its 2011 and medium-term fiscal targets. This strategy
includes a significant downsizing of public sector employment,
restructuring or closure of public entities, and rationalization in
entitlements, while protecting vulnerable groups. On the revenue side,
the government will reduce tax exemptions, raise property taxation, and
step up efforts to fight tax evasion.

The government is committed to significantly accelerate its
privatization program. To this effect it will create a
professionally and independently managed privatization agency, and has
drawn up a comprehensive list of assets for privatization with the aim
of realizing revenues of EUR 50 billion by the end of 2015. The
government will assess progress against intermediate quarterly and
annual targets.

In the
financial sector, liquidity remains tight, but policies
are in place to ensure adequate liquidity provision for the banking
system. The banking sector remains fundamentally sound and the
authorities are increasing capital requirements to further strengthen
capital buffers, giving priority to private market-based solutions.
However, the Financial Stability Fund is available as a backstop for
viable banks that cannot raise capital in the private market.

Further progress has been made with
structural reforms. Legislation to modernize public
administration, reform healthcare, improve the functioning of the labor
market, remove barriers to setting up and operating a business and
liberalize transportation and energy has already been passed or is
underway. The government will continue to push ahead in these areas,
with a particular emphasis in coming months on growth-drivers such as
reviving the tourist industry and removing administrative barriers to
exports. To make sure that the reform frameworks are effective as soon
as possible, the authorities will strengthen the process of
implementation, including through technical assistance from the IMF, EU
Member States, and the European Commission, and put monitoring
mechanisms in place.

Building on the agreed comprehensive policy package, discussions on
the financing modalities for Greece’s economic program are expected to
take place over the next few weeks. Once this process is concluded and
following approval of the IMF’s Executive Board and the Eurogroup, the
next tranche will become available, most likely, in early July.