Athens Digest 17.07.2019

• Vijlbrief: No talk of targets before reforms

• ESM’s Regling sets out priorities, meets Mitsotakis

• Mission chiefs Costello, Dohlman say tax cuts require redoubled reforms

• Greece taps market with lowest yield on record, overseas orders dominate

• Top court clears major Hellenikon hurdles 

# Euro Working Group president Hans Vijlbrief said talks sought by the government to lower primary surplus targets could not currently be considered _ nudging the question away from a firm rejection of the idea in the future. “The order is show credible reforms first, show high growth, show growth potential and then people in Europe maybe will speak about targets,” he said. He made the remarks at a panel discussion moderated by Athens Digest’s John Papageorgiou at the Economist conference in Lagonisi which ends today.

# A reduction in tax rates could be coupled with a broader tax base, the ESM’s Klaus Regling told the Economist conference, highlighting structural reform priorities. Others include a redoubled effort for privatization, the use of fiscal space from the budget to promote growth-friendly measures, as well as respect for fiscal targets set at the end of the bailout. “Although the government has just been elected and details remain to be seen, what is currently known seems promising to the extent that the country respects the established surveillance framework and its programme commitments,” said Regling who also met Prime Minister Mitsotakis.According to an announcement after the meeting, the PM reiterated that Greece will respect its fiscal targets and expressed his belief that the fast implementation of structural reforms can pave the way for higher growth and additional fiscal space.”

# Declan Costello, the Commission mission chief for Greece, attending the Economist conference, noted that creditors had not asked Greece to hold back its public investment programme to meet budget targets. The country, he said, faced the challenge of lowering the tax burden while keeping public finances in order and protecting social cohesion. The IMF’s mission chief, Peter Dohlman argued that Greece’s recovery remained relatively weak, stressing the need for lower taxes while narrowing the reform gap with the rest of the euro area.

# Greece raised EUR 2.5 billion with a 7-year bond auction, borrowing at its lowest rate in history (excluding T-Bill sales), in what Prime Minister Mitsotakis in a tweet called “a vote of confidence in Greece’s growth prospects.” The low yield (1.90 percent) and low coupon (1.875 percent) sale was five times oversubscribed. A third of the orders came from the UK and 84 percent from outside Greece. Fund managers accounted for 55 percent of allocations. With the auction, Greece marked its third successful outing to bond markets this year covering its annual market borrowing target of EUR 7 billion.

# The Council of State has cleared two major obstacles facing the Hellenikon development project _ throwing out a residents’ group complaint against planned high-rise buildings on grounds that they would spoil the landscape. The complaint was backed by two environmental groups. The court also ruled that legislative provisions in the ratified European Landscape Convention (Florence Convention) did not hand the Greek Archaeological Service planning permission rights.

On our Radar: Bonus Battle Over
Greece’s top administrative court, in a final ruling, has determined that bailout-era laws back in 2012 scrapping seasonal salary bonuses for civil servants were not in violation of the constitution. The Council of State plenary session ruling _  reversing an earlier decision _ noted that “even after the abolition of the bonuses in question, civil servants’ salaries ensured a decent standard of living, relative to those living on the poverty line and to those employed in the private sector receiving basic pay.”