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Greek FinMin reveals letter to creditors to dismiss reports on additional austerity

Xinhua, December 27, 2016 Adjust font size:

Greece's Finance Ministry released on Tuesday the letter sent by Finance Minister Euclid Tsakalotos to international creditors last week to dismiss media reports on additional austerity to unlock further aid.

In the letter written to the Euro group President Jeroen Dijsselbloem and the managing director of the European Stability Mechanism (ESM) Klaus Regling, Tsakalotos explained Athens' intentions regarding the Christmas bonus to low income pensioners and the VAT hike suspension on the islands hit by the refugee crisis.

Following the surprise announcement made by Greek Prime Minister Alexis Tsipras on Dec. 8 for the one-off bonus and the VAT hike suspension until January 2018, Euro Group and ESM had frozen the implementation of short-term debt relief measures for Greece agreed on Dec. 5.

This development has triggered speculation on additional austerity that creditors may ask for as conditions to release the next aid tranche in January.

Greek media reports on this possibility during the weekend forced the Finance Ministry to publish the letter to the creditors.

"The institutions did not request that the government take additional measures totaling 150 million euros (156.6 million U.S. dollars) due to the suspension of the VAT rate on some islands," the ministry said in an e-mailed press release.

In the letter, the minister also assured the creditors that the measures announced on Dec. 8 are not permanent ones, and highlighted the government's full commitment to the agreed fiscal path based on primary surplus targets of 0.5, 1.75 and 3.5 percent of GDP in 2016, 2017 and 2018 respectively.

The minister also pledged in the letter to activate a "contingency fiscal mechanism" that would make spending cuts automatically in case primary surplus targets are not met. Enditem