ATHENS – In a big boost to his plans to help speed a slow recovery from a 9 ½-year-long economic and austerity crisis, new Greek Prime Minister Kyriakos Mitsotakis’ plan to cut taxes is okay with the country’s creditors but fiscal targets still must be hit.
The Conservatives leader ousted former Premier and Radical Left SYRIZA leader Alexis Tsipras in July 7 snap elections and promised to lure back foreign investors and businesses scared off by a wave of tax hikes and leftist elements trying to keep them out.
Envoys from the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM,) which in the summer of 2015 put up a third bailout for Greece of 86 billion euros ($96.76 billion,) are meeting in the Greek capital with government officials to review progress on reforms.
New Democracy returned to power after winning the general election on a pledge to cut taxes imposed during Greece’s three successive international bailouts of 326 billion euros ($366.77 billion) that propped up an economy sinking under generations of wild spending and runaway patronage by political leaders.
The bailouts ended on Aug. 20, 2018 but Greece still hasn’t been able to make a full return to the markets, although the sale of a 7-year new bond shows Greece is on a path to bring investors back, Mitsotakis said.
The Troika, which holds most of the bailout debt after the Washington, D.C.-based International Monetary Fund (IMF) stayed out of the third rescue package after taking in the first two of 240 billion euros ($270.02 billion) is said to be in favor of the tax cuts.
“I know that the government wants to lower taxes which in principle I think is positive because it’s growth-friendly,” Klaus Regling, head of the ESM, the euro area’s rescue fund, told state-run ERT television in an interview.
“The question is always how it’s financed because it means there will be less revenue.”
Regling and other creditor representatives are in Greece to attend a financial conference near Athens.
Mitsotakis is likely to give details of his planned reforms during a three-day debate in Parliament that ends late July 22 with lawmakers formally voting to back his new government. He will address Parliament for the first time on July 20.
Greece raised 2.5 billion euros ($2.81 billion) in the bond auction, with offers exceeding 13 billion ($14.63 billion), at a yield of 1.90%, an historic low, but still almost double the interest on the bailouts.
But Mitsotakis still has to deal with the cost of a barrage of handouts Tsipras gave in the waning days of his administration in a failed bid to return to power, cutting taxes and giving pension bonuses after slashing benefits and raising taxes.
That took some 1.7 billion euros ($1.91 billion) from a primary surplus, about 1 percent of the Gross Domestic Product (GDP) which – along with indications tourism revenues will fall this year after five straight consecutive records – could put the government in a bind.
(Material from the Associated Press was used in this report)