ESM: Lowering of tax-free threshold, pension cuts must not be reversed

The European Stability Mechanism (ESM), Greece’s chief creditor, in a regular report on the Greek economy has warned Athens to fully implement all reforms agreed to in the bailout memorandums, including a 3.5 percent of GDP primary surplus until 2022.

The report coincides with the Bank of Greece’s announcement that it projects a 2.9 percent primary surplus for 2019.

On 7 June, the governmental majority in Parliament rescinded the drop in the tax-free threshold by 3,000 euros.

KKE Greek Communist Party and To Potami MPs declared themselves “present”, while main opposition New Democracy, the Movement for Change and extreme right Golden Dawn abstained.

The ESM report calls on the Greek government to proceed with the lowering of the tax-free threshold and underlines that implementation of agreed and legislated reforms must be guaranteed and not reversed.

The report also notes the annulment of an agreed to pension cut that was to have taken effect on 1 January, 2020.

In that regard, it stresses that the higher expenditures that the rescinding of the pension cuts entails limits the fiscal space for policies that can spur growth.

It is noted that since 2008 Greece lost nearly one-quarter of its GDP and that although the economy returned to growth in 2017 and 2018, it was not sufficiently robust for an economy that has endured so many years of painful recession.