Athens Digest 17.09.2018

• Seeking ways to scrap pension cuts

• ND leader Mitsotakis confident of victory, promises sweeping tax cuts and investment-friendly policies

• Poll: Conservatives lead with rulling Syriza narrowing margin

# With the government seeking ways to avoid pension cuts slated for January 1, the institutions wrapped up their first post-bailout mission in Athens on Friday with discussions on the 2019 budget and the execution of the 2018 budget (reportedly, on track). Discussions included working meetings (not negotiation) with the government represented only by Finance Minister Tsakalotos and his alt. Finance Minister Chouliarakis. Meetings took place, for the first time after 2015, at the premises of a Greek ministry instead of Hilton hotel. Other areas discussed which might raise concerns are labor law issues (wages, collective agreements), banks and investment which remains at low level.

# Greek negotiators are trying to make the case that there is enough fiscal space to scrap the cuts and claim there is scope in the deal signed with the Eurogroup for the measure’s suspension. The Commission denied a report in the state-run ANA (Athens News Agency) which cited sources saying that the institutions had agreed to cancel the measure. EC Chief Spokesperson Margaritis Schinas told Skai TV that a discussion on pensions can take place but agreed reforms have to be implemented. The issue of pension reform could also prompt a visit by Commissioner Pierre Moscovisi and Greek Finance Minister Euclid Tsakalotos to Berlin whose position is considered decisive. A Eurogroup decision is expected in November. Until then, a report will be prepared by the Institutions covering both the regular “European semester” and the (only applicable to Greece) “enhanced surveillance” exercises.

# New Democracy leader Kyriakos Mitsotakis expressed certainty at the 83rd Thessaloniki International Fair that his party will win the next general election and pledged to improve security, support private investment framework, cut taxes, slash social security contributions for primary pensions to 15 from 20-percent and reduce the ENFIA property levy by 30-percent over two years. According to his plan, the introductory tax rate for self-employed professionals will be reduced to 9-percent, while the business levy they have to pay will be scrapped. Corporate taxes, including dividends, will come down from 40 to 24-percent. VAT will be immediately slashed in the entire catering sector to 13-percent from 24 percent while capital controls will be lifted within the first six months. He vowed to maintain the national pension system but to repeal the reform known as the ‘Katrougalos’ Law,’ as well asking for a reduction of primary surplus targets. Referring to the FYROM name deal, he repeated that New Democracy will vote against in parliament and pledged to start negotiations from scratch in case the current parliament fails to approve it.

# Ruling Syriza has narrowed the margin with opposition New Democracy to 5.5-percent, according to a poll of voter intentions by Prorata polling company on behalf of the leftist paper ‘Efimerida Syntakton’. More specifically, the poll, which was conducted after the keynote address by Premier Alexis Tsipras at the Thessaloniki International Fair last week, showed that 24.5-percent would vote for New Demovracy against 19-percent for Syriza. The Movement For Change received 7-percent, ahead of extreme right Golden Dawn with 6-percent and Communist KKE on 4.5-percent.

On Our Radar: Tsakalotos remains low key
While government officials appear confident that pension cuts will not be implemented, Finance Minister Euclid Tsakalotos has struck a more restrained tone on the issue saying that it is a “discussion in progress.” Referring to Germany’s stance on the issue, he told the Naftemboriki paper that the government is pursuing a strategy of persuasion rather than imposition. Germany he said has a special weight but “the context is now completely different.” He added that capital controls will be further eased “very soon”. The easing, he said, will complete the second phase of a three-pillared roadmap which refers to cash withdrawal constraints and the opening of accounts. “This will lead to the final phase for the complete lifting of controls on restrictions on the transfer of capital abroad.”