New proposals on way, focus on five key areas

Greece is due to finish sending on Saturday its latest proposals to the country’s lenders in the hope that it will have a response by the beginning of next week and that talks in Brussels can resume with the aim of concluding a deal that would unlock another 7.2 billion euros in bailout funding.

Kathimerini understands that there are five key areas in which Athens and its creditors are still some distance apart and will have to work on over the next few days. These are macroeconomic forecasts, fiscal targets, new measures, labor market reforms and pension cuts.

Greece and the institutions appear to have converged on the growth forecast for this year, with both sides predicting the economy will expand by 0.5 percent.

On fiscal targets, there also appears to be a meeting of minds. The primary surplus target for this year is expected to be between 1 and 1.5 percent, rising to 1.5 to 2 percent next year and to 3.5 percent from 2017.

With regards to new measures to cover this year’s fiscal gap, Athens and its lenders have yet to agree on a comprehensive package. It will, however, include an overhaul of Greece’s value-added tax. It is likely that there will be just two, rather than the current three, rates. The top rate is set to be between 18 and 20 percent, while the lower rate between 8 and 9 percent.

The government is also considering leaving in place the solidarity tax on incomes above 30,000 euros without the 30 percent reduction that the previous coalition had introduced. Other taxes may also be introduced.

Greece and its lenders seem far apart on the issue of labor reform as the government insists that collective contracts should be reintroduced and that the institutions’ demands for relaxing the restrictions on mass dismissals should not be met.

On pensions, the government is proposing the scrapping of early pensions as an alternative to introducing the “zero deficit” rule, which would mean stopping public subsidies to pension funds.

Finance Minister Yanis Varoufakis insisted that “no red lines have been crossed” by the Greek side so far. However, on Thursday night Deputy Prime Minister Yiannis Dragaskis was on the receiving end of heavy criticism regarding the government’s negotiating strategy when he met with members of SYRIZA’s political secretariat.

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