Greece pledges fiscal and structural measures

Greece dodges bankruptcy as Eurozone grants bailout extension (Part 12 of 14)

(Continued from Part 11)

Greece secures extension with promises

In order to secure a four-month extension to its bailout loan, Greece (GREK) pledged to undertake certain reforms, including fiscal and structural measures. The reforms were listed in Greece’s reform agenda it submitted to the Eurozone (EZU) (VGK) (HEDJ) (FEZ) finance ministers

Fiscal and structural measures

Greece agreed to certain fiscal and structural measures in its bailout extension. Below is a summary of those reforms.

• tax policies. Greece agreed to reform the VAT (value-added tax) policy, improve taxes, modernize the income tax code, and combat tax evasion. A reform in the tax laws would be particularly relevant to American firms such as Accenture (ACN), Xerox Corporation (XRX), and the 3M Company (MMM) that have a presence in Greece.

• public finance management. Greece agreed to improve public finance management and implement a strategy on the clearance of arrears, tax refunds, and pension claims.

• revenue administration. Greece promised to modernize the tax and customs administrations in order to enhance openness, transparency, and international reach of the process. It will augment inspections, conduct risk-based audits, and improve collection capacities.

• public spending. Greece will review and control spending in every area of government spending. These areas will include education, defense, transportation, local government, and social benefits. The government will identify cost-saving measures and control health expenditures.

• Social security reforms. The country will continue to modernize its pension system, consolidate pension funds to achieve savings, and establish a stronger link between pension contributions and income.

• Public administration and corruption. Greece will fully operationalize the National Plan Against Corruption, target fuel and tobacco product smuggling, reform public sector wages, and rationalize nonwage benefits. It will also reduce the following:

  • the number of ministries from 16 to 10

  • the number of special advisors in general government

  • fringe benefits of ministers, members of Parliament, and top officials

Continue to Part 13

Browse this series on Market Realist:

• Part 1 - Greece still in the headlines, this time a bailout extension

• Part 2 - Market reaction positive to Greece’s bailout extension

• Part 3 - What you absolutely need to know about Greece