Prime Minister Alexis Tsipras flew to Brussels to meet Greece’s international creditors on Wednesday to try to bridge gaps on key elements of the proposals made by his left-wing government to shore up state finances in return for vital loans.
Here is a summary of the proposals his government made, based on a letter he sent to European Commission chief Jean-Claude Juncker on Monday.
Extra savings on pensions worth 1.05 percent of GDP in 2016 and 1.1 percent in 2017, with measures including an increase in pension contributions and higher healthcare contributions for pensioners.
Early retirement to be curbed gradually from 2016 to reach a retirement age of 67 for all by 2025, but some exemptions to be maintained, including for arduous professions and mothers with disabled children.
A special benefit for some low-income pensioners, amounting to between 57 and 230 euros ($65 and $261) a month, to remain for now but be replaced from 2020 by a new protection framework for low pensions. Greece’s lenders wanted the benefit scrapped.
Greece to extend the scope of its 23 percent value-added tax rate, but keep reduced rates of 13 percent for electricity, basic foods, hotels and restaurants and 6 percent for medical supplies and books. Officials said lenders had asked for only two rates: one of 23 percent that would take in electricity and restaurants, and one of 11 percent, to include medicines.
VAT discounts for certain islands to be scrapped, something that Tsipras’ coalition partners, the Independent Greeks, have said they will not accept.
Income tax hike for high earners
Solidarity tax for higher earners to be increased. Officials said this would apply to incomes above 50,000 euros, while the tax would be reduced for incomes below 30,000 euros.
Corporate and luxury tax hikes
– An increase in corporate income tax in 2016 to 29 percent from 26 percent.
– A one-off levy in 2015 of 12 percent on businesses that post a profit of over 500,000 euros
– Increases in luxury tax on pools, planes, big cars and private boats over 10 meters (33 feet)
– A tax on gambling slot machines (VLTs).
Privatization targets, excluding bank shares, are: 1.4 billion euros in 2015, 3.7 billion in 2016, 1.2 billion in 2017.
Privatizations to impose a minimum amount of investment, a commitment by investors to promote the local economy and the retention of a state shareholding.
The transfer of the state’s shareholding in the Greek telecoms operator to the privatization agency will not be part of the lenders’ “prior actions,” officials said.
Greece will not privatize its power grid operator nor its dominant power utility PPC, as requested by creditors, officials said.
– Defense spending to be cut by 200 million euros in 2015
– 4G and 5G mobile telecommunications licenses to be issued
– Public sector wages not to be cut from end-2014 levels
– Special tax deductions for poor residents of islands
– Gas market to be reformed
Primary budget surplus
Primary budget surplus to be 1 percent in 2015, 2 percent in 2016, 3 percent in 2017 and 3.5 percent in 2018. This is in line with what Greece’s lenders proposed earlier this month, but much lower than the targets agreed with the previous Greek government of up to 4.5 percent.
Greece is to adopt supplementary 2015 budget effective as of July 1, as well as a 2016-2019 medium-term fiscal strategy.
The government promises to have the list of reforms, including VAT and other legislation, approved in parliament “in a matter of days.”
Greek officials said Athens had repeated its demand for the euro zone to lend it money to buy back 27 billion euros of its bonds from the European Central Bank – effectively rolling over the debt on more favorable terms.
Greece wants the deal to include financing of infrastructure and new technologies through the European Commission’s 315 billion euro investment plan and from EU funds that it was eligible for in 2007-2013 but did not use.
Greece plans fiscal measures worth 7.9 billion euros over 2015 and 2016. [Reuters]