Greece Defensive Over Defense Industries

ATHENS – After taking  break when negotiations stalled over how to close a 2014 budget gap and delayed reforms, Greece and its international lenders are talking again and one of the stumbling blocks preventing release of a one billion euro ($1.37 billion) installment is the government’s reluctance to sell off or close down its money-bleeding defense industries.

Prime Minister Antonis Samaras wants the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) go let the defense firm EAS, which critics said is inefficient and packed with political patronage hirings, stay operating another year at least and try to market exports, although it has no work.

The Troika hasn’t responded yet to that idea but had been pushing for EAS and a partner organization, ELVO, which makes military vehicles to go on the blocks or cease operation.

Greece has reportedly proposed that EAS be overhauled while in operation, retaining two factories for 12 months, with 350 of the firm’s 850 employees to keep their jobs and the remainder to go.

It remained unclear, however, whether the Troika will agree to the 500 proposed layoffs from EAS being checked off the list of 1,300 public sector dismissals Greece must enforce by the end of this year.

Also on the agenda is whether Greece will comply with demands to let banks foreclose on homes of people who can’t afford to pay their mortgages because of big pay cuts, tax hikes and slashed pensions imposed by the government on Troika orders.

Samaras and Finance Minister Yannis Stournaras want to let banks seize homes by lifting a moratorium that is due to expire on Dec. 31 but the government, fearing more social unrest and growing homelessness if foreclosures are allowed, said it wants to devise a mechanism to protect those who can’t pay, said to be 85 percent of more than 230,000 homeowners, from those who are exploiting the protection.

Samaras also wants to continue a reduction in the Value Added Tax (VAT) from 23 to 13 percent for restaurants which was begun in the summer to boost tourism but the Troika said it’s costing too much money in lost revenues.

It’s not been reported whether the establishments, as Samaras had demanded, passed on the savings to customers or are pocketing the difference – or even reporting all their income as the sector is notorious for not issuing receipts and trying to do a cash-only business as much as possible to evade taxes.

Development Minister Costis Hatzidakis was to discuss both issues with the Troika while Stournaras scheduled a separate meeting with the foreign auditors.

Later this week Samaras is to lead a mini-cabinet meeting with both ministers and Administrative Reform Minister Kyriakos Mitsotakis, who is overseeing an overhaul of the civil service to talk about why goals aren’t being met.

A controversial unified property tax is expected to be submitted to Parliament and voted on in the coming days amid worries that some members of Samaras’ New Democracy Conservatives and his coalition partner, the PASOK Socialists, may not follow orders to vote for the reforms and unhappiness the foreclosure moratorium may be tacked onto the property tax bill so there can’t be separate votes.

The government is aiming to wrap up all its work by Dec. 20 when Parliament is set to close for Christmas, Hatzidakis said.