Athens Digest 22.07.2019

• PM Mitsotakis announces sweeping tax cuts, sticks to surplus commitments

• Regling says tax cuts should take place only if the numbers add up

• Merkel hails new potential but insists “no discounts” because of gov’t change

• US Ambassador Pyatt calls for yet stronger defense cooperation with Greece

# Launching a debate on his government’s policy statements which culminates tonight in a confidence vote, Premier Kyriakos Mitsotakis announced sweeping tax cuts on Saturday to stimulate growth – including an average property tax cut of 22-percent as of August. Moreover, he said corporate tax will be reduced to 20-percent in two phases beginning in September with a cut from 28 to 24-percent for 2019 revenue, while tax on dividends will be slashed from 10 to 5-percent. With regard to Greece’s commitment to achieve 3.5-percent primary surpluses, he insisted that the “draft 2020 budget that will be tabled in September will not…dispute the surplus targets that were unfortunately agreed by the previous government.” The economy’s improvement will allow the negotiation of more “realistic” surpluses in 2020, he added.

# Referring to the government’s planned tax cuts,  ESM Managing Director Klaus Regling said in an interview published by the Kathimerini newspaper yesterday that  “we have not seen the details of the government’s program” and that it will be discussed when the institutions return to Athens in September. “If there is a gap in the budget, it has to be covered somehow, ” he said. The discussion on lowering surplus targets is not relevant at the moment, he explained, since the government has agreed to stick to existing targets, something welcomed by markets. He noted that the issue may be re-examined in the future.

# For her part, German Chancellor Angela Merkel said in her summer press conference last Friday that the government change in Greece doesn’t mean there will be a “discount” regarding relief measures. “The Eurogroup said there will be no immediate discount because there has been a change in government. Now we need to see the further developments,” she said, noting however that the new government’s program is different from that of its predecessor and that it  “will bring the potential for more growth and liberate the forces of growth in Greece.” “Then we will have to see how things evolve – it is already very positive that Greece managed to issue a bond in the markets that was very well priced – and the rest of talks will have to be conducted with the Eurogroup and the Commission.”

# Seeking to build on recent progress made with the previous government, the US Ambassador to Greece Geoffrey Pyatt has called for even stronger defense and security cooperation between Athens and Washington. Pyatt told the Kathimerini newspaper in an interview published yesterday that “now we have a clear commitment from Prime Minister Mitsotakis and his team to move even faster.” He noted that despite the recent tension with Ankara over its purchase of the S-400 weapons system from Russia and its illegal drilling activities off Cyprus, both Greece and the US  “believe strongly that it’s essential for us to work as hard as we can to ensure that Turkey remains anchored in the West.”

On Our Radar:  Two self-styled anarchists arrested over paint attack against office of industrialists federation  in Athens 
Police said yesterday that they arrested two of three members of the Rubicon anti-establishment group that had been detained earlier in the day for a paint attack against the offices of the Hellenic Federation of |Enterprises (SEV) in central Athens. According to reports, members of the group also gave out fliers to passers-by in the Acropolis area, close to the office located in central Syntagma Square. The new government has vowed to crack down on the activities of anti-establishment groups which have pledged to resist. Rubicon has conducted similar attacks over the past few years, targeting, among others,  embassies, Greek state organizations and political party offices.