Greece to Auction Liened Properties to Qualify for Eurogroup’s Latest Tranche

23 January 2018

Despite the good news coming from the Eurogroup meeting, which saw the conclusion of a political agreement to release the fourth tranche of the European Stability Mechanism program, 2018 will be another year of austerity in Greece. The Greek government still needs to implement additional measures which are likely to affect the middle class particularly badly.

The Eurogroup’s political agreement to release a €6.7 billion tranche for Greece will imply further austerity measures. Despite complimenting the Greek government’s policies, and the fact that some targets have not only been met but exceeded, Greece will have to increase its austerity measures, which will fall heavily upon a middle class which has already been hit before.

According to a document containing the Eurogroup’s new demands on Athens, which was reviewed by the Greek newspaper To Vima, the Greek state will have to move ahead with the sale of 10,000 real estate assets later this year and to auction a further 40,000 properties between 2019 and 2021.

According to To Vima, this requirement will inevitably lead to the sale of the primary residences of many families whose mortgages have gone into arrears, which would very likely trigger a wave of social dissent, as the middle class will be especially hard hit.

This Monday, Mario Centeno’s debut as the president of the Eurogroup, Eurozone finance ministers agreed at a political level to unblock part of the fourth tranche of the Greek financial assistance program agreed upon in the summer of 2015. Total lending under the program could reach 86 billion euros.

However, the release of 1 billion is conditional on the pursuit of “prior actions” that will have to be applied “urgently,” the Eurogroup wrote in the final communiqué following yesterday’s meeting.

After the eurozone’s ministers gave the green light, the European Stability Mechanism (ESM) will also have to review the third periodic evaluation of Athens’ compliance with the Greek memorandum.

The first €5.7-billion tranche could then be released in February, an amount to be used for debt servicing, the payment of debts to suppliers that are currently in arrears and to create a buffer to boost Greece’s cash reserves. This last is considered to be the most critical, as it would aid in Greece’s ability to tap financial markets.

The remaining €1 billion could be released in spring by the European Stability Mechanism, and its German managing director, Klaus Regling, after European institutions confirm compliance with the new measures.

Higher Levels of IRS and VAT on exempt islands

In addition to the need to auction off real estate tied to non-performing loans, the Greek authorities will also have to bring forward a reduction (to 2019, initially planned for 2020) of the minimum level at which Greek taxpayers are subject to income taxes, from around an annual income of 8,700 euros to €5,700. However, this measure will only have to be implemented if the country fails to meet the primary budget surplus target of 3.5% of GDP.

Also, according to the document that To Vima reviewed, in the coming months, Alexis Tsipras’ government will be required to move ahead with a new wave of privatizations aimed at raising a billion euros in revenues. It would also have to impose a further increase in the VAT charged on Greek islands that have so far benefited from a temporary exemption/rebate.

The three-year program is set to expire on August 20 of this year, and between the third review, which is still ongoing, and the fourth review of Greece’s compliance with the memorandum, Athens will also have to implement 88 new measures linked to structural reforms that are being demanded by the troika.

European leaders confident of a happy end to Greece’s troubles

“We have reached a political agreement on the review, an agreement that reflects the enormous effort and cooperation between the Greek government and the [troika’s] institutions,” the Portuguese ex-minister of Finance, Mário Centeno said in Brussels yesterday.

In the statement, the Eurogroup underscored the Greek government’s commitment to reach a surplus of 3.5% in its Budget for 2018 and highlighted the capacity of the Tsipras-led team to exceed the fiscal targets set for the previous three years. It highlighted the improvements in the capacity of the Greek government’s ability to collect taxes and the improved business environment.

In addition to the progress made by Athens, which was highlighted by Centeno and Regling, Spain’s Economy Minister Luis de Guindos said Tuesday that he was sure that the third revision would merit a validation by the ESM. Germany’s Finance Minister Peter Altmaier said he did not see any need for a fourth assistance program for Greece once the current one is completed.

So far, the ESM – responsible for implementing the Greek memorandum – has already disbursed €40.2 billion for Greece. Athens made early repayments of €2 billion. Of the €86 billion rescue, €45.8 billion remains to be disbursed, part of which is earmarked for after the memorandum of understanding’s last revision.

Original Story: Jornal de Negócios – David Santiago

Translation: Richard Turner

 

Houses devalued by taxes: prices down by 4%

29 December, Il Giornale

Taxation continues killing real estate. Over 2017, in fact, house prices in Italy have registered a decrease of 4%, meaning an average price of 1.819 euro per Sq m, according to Idealista. 85 cities over the 103 surveyed have reported drops in values of two digits, such as Benevento with -18.6% and Varese with -10.1%. Big cities haven’t been spared, as shown by the negative variations of Rome (-4.3%), Milan and Naples (both -3.8%). The reason is taxation: along with the 21.2 billion for Imu and Tasi paid by Italians in 2016, there are also the 5.6 billion euro for Irpef on property and the 2.1 billion for flat tax on rents. If we consider the other miscellaneous taxes for over 9 billion euro for property transfers, the total taxation will exceed 35 billion. It’s clear that such a massive taxation can contribute devaluating real estate assets, considering that a house which is not the first residence and that is not for rental represents a significant cost for families. Government also withdraws a significant percentage from rents, if these are not of the residential type.

“Real estate cannot be saved by the garden benefit”, twits the president of Confedilizia, Giorgio Spaziani Testa, commenting on the year end press conference of the PM Gentiloni concerning “the failed institution of the flat tax for commercial rents, as requested by the majority and the opposition”. According to Vincenzo De Tommaso, from the research centre of Idealista, “the negative trend of house prices started in 2007 is due to the offer surplus”. In 2018, he adds, “there will be a more homogeneous recovery with prices moderately growing in medium and large cities”.

Among the few positive exceptions of 2017, there are some excellent performances registered by Trieste (+6.2%) and Sondrio (+3.8%). The art cities Venice (4,362 euro per Sq m) and Florence (3,434 euro per Sq m) are still the most expensive.

Source: Il Giornale

Translator: Cristina Ambrosi