18.02.2015

"There is no alternative" to austerity and privatization? The Varoufakis papers of the Eurogroup meetings

Greek finance minister Yanis Varoufakis, the personalized anti-"tina", is currently the main enemy of the German-led mainstream technocrats of the "Eurogroup" due to his resistance to continue the austerity policies of the "troika". Anyone who (like some German newspapers) claims that "he and the Greek government are brash and asking a lot, but have not provided any papers of propositions or alternatives to the austerity programme at the recent Eurogroup meetings" is now debunked by the documents by Greek finance minister Yanis Varoufakis that have been published by www.capital.gr (the English version can be found here (via Robert Misik, Viennese journalist)


Greek finance minister Yanis Varoufakis

The alternatives to be found in these papers can be summarized in four main points: 

a) a development bank instead of privatizations


"[W]e want to invest to reduce energy costs for medium and large scale industries, to support innovation, start-ups and to promote a shift towards sectors with comparative advantages and export potential such as pharmaceuticals, organic agriculture, light manufacturing, energy resources, with the emphasis naturally on renewables. (...)
Quick fire sales of public property, at a time when asset prices are deeply depressed, is not something that anyone would advocate.
Instead, the government will create a development bank which will incorporate state assets, enhance their equity value through reforming property rights and use them as collateral for the purposes of providing, in association with European investment institutions such as the European Investment Banks, funding to the Greek private sector"

b) investment instead of austerity with unrealistic growth goals



"We recognize the tremendous efforts made by your countries’ taxpayers to support Greece’s debt and maintain the integrity of the euro.
However, unrealistic, self-defeating fiscal targets have been imposed on our country and population and hence must be revised. A primary surplus target of 4.5% of GDP year-in-year-out has no historical precedent in any situation resembling that of Greece today. It will simply not be possible for our country to grow if we remain on the growth sapping austerity path imposed on our economy. It is also quite inconsistent with achieving a sustainably reduced debt-to-GDP ratio.
The new contract we propose to discuss with you should recognize this evidence."

c) fight against tax evasion and rent-seeking, stop policies undermining social cohesion



"The government undertakes to reduce tax evasion, tax immunity, smuggling, cartelsand rent-seeking. Reforms will improve the enforcement of income tax, VAT, and social contributions, and fight tax evasion with an emphasis on transfer pricing in large corporates active abroad. The government stands ready to discuss legislative proposals to reinforce the legal framework for an independent tax authority within the Ministry of Finance.
A full legislative package will improve the business climate and undermine rent-seekers, in particular in the oil sector, the financial sector, and the media. Public procurement procedures will be made more transparent and fair thanks to a more centralized system, efficient monitoring and e-procurement. Reforms will increase the overall efficiency of the public sector, with an objective to improve the quality of services delivered to every citizen. Policies undermining social cohesion have failed and will be dropped."


d) no pension cuts, but reforms, mainly on tax collection, and a progressive taxation on the wealthiest



"There will be no measures that we consider recessionary such as pension cuts or VAT hikes.
(...) 
[W]e intend to:
  • Cut the Gordian Knot of bureaucracy – through legislation that bans public sector departments from asking of citizens or business information, certificates or documents that the state possesses already (and which reside in some other department)
  • Tax authority reforms towards greater independence, propriety and transparency
  • Create an efficient and fair tax court system
  • Modern bankruptcy system
  • Judicial system reforms, in general
  • Creating a competitive and sound electronic media environment that enhances transparency and yields tax revenues for the state
  • Dismantle the various cartels

(...)
The authorities contemplate exceptional action in terms of revenue mobilization in 2015. Up to €5.5bn are expected over the year thanks to a strong effort to (i) fight illegal trading, tax evasion and corruption (ii) better control transfer pricing in companies active abroad (iii) reform arrears collection process and (iv) implement a more progressive taxation on the wealthiest."




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