Greece's proposed reforms for bailout deal accepted by Eurogroup but with reservations
The Greek Finance Minister Yanis Varoufakis sent a letter to Eurogroup President Jeroen Dijsselbloem just before the deadline of midnight Monday that outlines proposed reforms that Greece was willing to undertake to receive bailout funds.
The complete text of the letter can be found here or here. Many of the reforms have to do with tax collection and the tax system, an area that both Syriza and its EU partners agree is in drastic need of reform. There is also an emphasis on tackling corruption. While there are sections that deal with tackling poverty and humanitarian issues, these are always treated as being addressed in a manner that does not impact negatively on the fiscal situation.Under the final section entitled the Humanitarian Crisis there is a section that an article in the Business Insider considers could redefine how we view the modern welfare state. The proposal is for a guaranteed minimum income(GMI). While this is often supported by leftists, it is also supported by many on the right The libertarian right sees the system as a replacement for the many separate welfare schemes that have grown in advanced capitalist societies with a single payment that could be spent by the recipient at will and without bureaucrat intervention. This contrasts with other right wing groups who want to ensure that welfare is narrow and targeted and goes only to those who are "deserving". The idea has been supported by free market ideologues such as Milton Friedman and Friedrich Hayek.Hayek said:Another supporter of the GMI is Sam Bowman, deputy director of the Adam Smith Institute who writes:The role of the GMI as presented in the Greek reforms is to save money not solve the humanitarian crisis. This may be a means by which Greece is trying to sell the program to its partners. For those who would earn more if they could choose early retirement when laid off the GMI would represent a decline in income. The GMI is hardly the revolutionary new program the Business Insider describes:While the EU and Troika or "institutions" have accepted the reforms listed--not surprising since they were developed through constant consultations--they have also demanded further elaboration of them. Christine Lagarde the manager of the International Monetary Fund(IMF) and Mario Draghi, the President of the European Central Bank expressed some reservations and objections to the list. The Eurogroup finance ministers in an official statement said:
There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need descend. To enter into such an insurance against extreme misfortune may well be in the interest of all; or it may be felt to be a clear moral duty of all to assist, within the organised community, those who cannot help themselves.Hayek's formulation for the GMI is much more idealistic than that presented in the Greek reform proposals. Here is part of the context of the Greek GMI reforms as set out in the letter:
• Evaluate the pilot Minimum Guaranteed Income scheme with a view to extending it nationwide.• Ensure that its fight against the humanitarian crisis has no negative fiscal effect.So any expenditure on the GMI will presumably need to be revenue neutral or paid for by saving elsewhere. Another passage makes it clear that the GMI is actually intended to discourage early retirement which would cost the state more in pensions.The reforms promise to:
"..provide targeted assistance to employees between 50 and 65, including through a Guaranteed Basic Income scheme, so as to eliminate the social and political pressure for early retirement which over-burdens the pension funds."This would allow those between 50 and 65 who may become unemployed through becoming jobless, no doubt in some cases through the measures accepted for the bailout loan, to remain in the job market until conditions improve for them without opting for early retirement which would cost the government more.
"The ideal welfare system is a basic income, replacing the existing anti-poverty programmes the government carries out (tax credits and most of what the Department for Work and Pensions does besides pensions and child benefit)...Like the current benefits system, this would provide a safety net. But ‘benefits traps’, where people lose as much in benefits as they earn from work, would be eliminated."
In the First Muslim Caliph, Abu Bakr introduced a guaranteed minimum standard of income, granting each man, woman, and child ten dirhams annually; this was later increased to twenty dirhams.
“We call on the Greek authorities to further develop and broaden the list of reform measures, based on the current arrangement, in close coordination with the institutions in order to allow for a speedy and successful conclusion of the review.”Greece is being presented with more and more hoops to jump through to receive further funds. In the end the Greek government may decide enough is enough and break free through an exit from the euro zone.