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Euro zone concerned Greek tax measures, handouts threaten agreed targets

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Euro zone concerned Greek tax measures, handouts threaten agreed targets
FILE PHOTO: European Stability Mechanism Managing Director Klaus Regling attends a news conference at the Ministry of Finance in Nicosia, Cyprus November 2, 2017. REUTERS/Yiannis Kourtoglou   -   Copyright  YIANNIS KOURTOGLOU(Reuters)
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LUXEMBOURG (Reuters) – Euro zone creditors are concerned that Greek pension payments and social handouts and the scraping of already agreed tax reforms put the agreed primary surplus target at risk, the head of the euro zone bailout fund Klaus Regling said on Thursday.

Euro zone creditors and Athens agreed last year when Greece was exiting its last bailout that the country would keep a primary surplus — the budget balance before debt servicing — at 3.5 % of GDP until 2022.

“We are concerned that the fiscal measures adopted last month put the fiscal target of the primary surplus of 3.5% of GDP at risk,” Regling told a news conference, adding he took note of the Greek government’s statement it would reach the primary surplus target despite these measures.

Greek lawmakers approved in May tax breaks and bonuses for pensioners before elections in earl July, rowing back some austerity mandated by international bailouts.

The package brought by the left-wing Syriza administration includes an annual payment for 2.5 million pensioners, a reduction in a sales tax on basic foodstuffs and a cut in tax rates on electricity and gas bills.

“Of course we are now in June, there is another six months to go, so we are talking about estimates here, but we are quite confident together with the Commision that this risk is really there, that the primary surplus might be missed by a significant margin,” Regling said.

“We are also concerned because the commitment to consult with the institutions on important fiscal measures was not adhered to … which is clearly a breach of the agreed process,” Regling said.

“So we will come back to all these thins with the new government,” he said.

(Reporting By Jan Strupczewski)

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