The red ink told its own story. Greece’s creditors looked at the plan submitted by Alexis Tsipras to end his country’s debt crisis and found it wanting. Like a teacher dealing with an obtuse pupil, the message in the revised document sent back to the Greeks was simple: this is a shoddy piece of work. Do it again.
Without question, this makes life tough for the Greek prime minister, who thought the concessions offered on Monday were as much as he could deliver politically. Tsipras bridled at the demands from the troika to cross all his red lines and that means the crisis is back on again.
Athens should not have been entirely surprised by the response given that the International Monetary Fund – one third of the troika – thinks a repair job on the public finances should be structured so that 80% of the improvement comes through spending cuts and 20% from tax increases.
The plan put forward by Tsipras was skewed in the other direction. Of the 7.9bn (5.6bn) that the Greek government said the plan would raise, 92% came from tax increases.
In the unlikely event that the extra revenues were collected in full, the IMF believes the one-off levy on bigger businesses coupled with the increases in corporation tax would hinder growth. It thinks the Greek plan will only add up if there are immediate cuts in pensions and higher VAT on restaurants and medical supplies.
This post was published at David Stockmans Contra Corner on June 25, 2015.
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