Athens Digest 18.07.2019

• Creditors stay on for informal talks with new government

• Regling says tax cuts “positive in principle”

• Cash balance deficit jumps in January-June

• Greece seeks U.S. help over mounting Turkey tension 

# Institutions’ representatives will remain in Athens for a series of courtesy meetings with the new government. The officials from the European Commission, European Stability  Mechanism, International Monetary Fund as well as the European Central Bank (its representative arrived yesterday) will hold talks with officials from the ministries of Finance, Development, Labour, Energy, and Justice _ all at the government’s general secretariat building in central Athens. Discussions so far have mainly focused on the government’s planned tax reform before the first bill is tabled next month. It will include some initial changes_ property and corporate tax reduction as well as details on the 120 installments payment scheme_ but a broader bill is expected at a later stage after its assessment by the institutions in September.  The creditor officials were attending the two-day Economist’s Conference.

# Klaus Regling, the ESM managing director, says he is broadly supportive of the government’s plans to cut taxes but that more details need to be discussed. “I know that the government wants to lower taxes which in principle I think is positive because it’s growth-friendly,” Regling told state-run ERT television. “It is a fact that tax rates in Greece, particularly corporate income tax and personal income tax are high … The question is always how it’s financed because it means will be less revenue. He added: “One way (to compensate for this) would be to broaden the tax base because the number of people who actually pay taxes in Greece is relatively small compared to all other European countries. … But we didn’t go into all those details. It’s a bit too early for that. The European institutions will come back in September to analyse more detail. But the finance minister also promised that we would get detailed information in the next few days. And that’s a very good sign of cooperation.”

# The Bank of Greece says the central government cash balance recorded a deficit of EUR 3.388 billion in the first six months of 2019, from EUR 1.878 billion a year ago. Also: Ordinary budget revenue was EUR 20.89 billion and spending was EUR 25.773 billion in January-June, from last year’s respective figures of EUR 21.91 billion and EUR 24,368 billion.

# Nikos Dendias, the foreign minister, has asked senior officials in the Trump Administration for stronger backing in the dispute of Greece and Cyprus with Turkey. “I asked the United States to adopt a clear position, to clearly support Greece with regard to issues of Turkish aggression,” he said after talks in Washington with Secretary of State Mike Pompeo. “We asked the United States for the establishment of a line of communication in the event of any issue arising in our relations with Turkey, where a clear and immediate stance from the United States could be useful.” Dendias invited Pompeo to Athens and said a trip in the autumn was possible. He also met with National Security Advisor John Bolton and Bob Menendez, the senior Democratic senator for New Jersey and ranking member of the Senate Foreign Relations Committee. Pompeo, according to a State Department readout of the meeting, described Greece as a “pillar of stability in the Eastern Mediterranean and the Balkans” _ remarks that were echoed in Greece by U.S. Ambassador Geoffrey Pyatt, attending the final day of the Economist conference.

On our Radar: Letting Larco Bosses Go 
Greece’s privatisation agency HRADF has moved to replace the board of directors at nickel producer Larco after an attempt to bypass strict budget limits placed on the company. HRADF posted an expression of interest for the positions of chairman, CEO board members. Financial problems at Larco, which is 55 percent state-owned, were further exposed earlier this year when an 11th-hour agreement kept the power on at the company despite debts to the Public Power Corp. now exceeding EUR 300 million.