Standing differences between Greece and creditors remain

Standing differences between the embattled Greek government and institutional creditors remained unresolved even after the weekend round of negotiations in Athens, with new austerity measures after 2019 and the Greek side's demand for countervailing measures the biggest obstacles.

In a most recent statement referring to the course of negotiations, ESM Managing Director Klaus Regling expressed doubts over whether the now delayed second review of the Greek program can be concluded by the latest "unofficial deadline" given, i.e. the March 20 Eurogroup meeting.

Scheduled contacts between experts' committees representing both sides have been set for Tuesday, while an extension of negotiations until Friday cannot be ruled out. The goal remains for a staff-level agreement to be achieved this week.

Conversely, lack of a breakthrough could extend uncertainty over the Greek program, essentially the third bailout, until May.

In terms of details, the two sides are still not "on the same page" over the level of the primary budget surplus, as a percentage of GDP, which the Greek budget posted in 2016. The leftist government has reportedly sent creditors data showing that the figure exceeds 3 percent of GDP, whereas the Bank of Greece (BoG) has revised its forecasts, from 2 percent to 2.5 percent.

Primary budget surplus

Nevertheless, the IMF has not revised its forecast for the Greek  primary budget surplus in 2016, which remains at 0.9 percent. One reason cited is the fact that the Fund is awaiting official figures from Eurostat and the independent statistical service in Greece, EL.STAT, expected in the first half of April.

On the government's side, a source on Sunday claimed that creditors are not insisting that a fiscal gap of 700 million euros will emerge in 2018, with the figure dropping to between 200 to 300 million euros.

The same source denied reports that the IMF is demanding pension cuts or a lowering of the tax-free threshold after 2018,

Another reputed difference of opinion has a "class-based" parameter, with the IMF reportedly pressing for a reduction in Greece's "Scandinavian" income and corporate tax rates. Conversely, the leftist Greek government wants countervailing measures to off-set losses by specific social groups, which it claims will be affected from a proposed lowering of the tax-free annual income level.

Currently, the figure is at roughly 8,600 euros, which means that most Greek taxpayers pay no annual income tax.

Additionally, Athens is painting a reduction of social security contributions as a "growth measure", instead of favoring a reduction in corporate and business tax rates.

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