Athens sent its proposals to creditors on Monday for an overhaul of the value-added tax regime as Greek officials indicated that an agreement on a reforms-for-cash deal was close.
In a bid to secure progress on the technical level of negotiations to enable a political decision that would unlock rescue loans, officials of the so-called Brussels Group were to hold a late-night teleconference on Monday that was expected to address these proposals.
Greece’s VAT proposal is said to foresee two rates of value-added tax instead of the current three. The highest would be set at 18 percent and relate to virtually all services and commodities except food and medicines, with a discount of 3 percentage points for non-cash transactions. The lower rate would be set at 9.5 percent and would relate to food, drugs and books, with the same discount applying to cash-free transactions. The proposals appear to be part of a broader bid by the government to boost non-cash transactions while curbing tax evasion. VAT evasion in Greece is estimated at 9.5 billion euros per year.
The Greek proposal was sent to creditors at around the time that To Vima reported that European Commission President Jean-Claude Juncker had pitched a compromise proposal to Greece, foreseeing low primary surpluses and some 5 billion euros in reforms, chiefly tax measures. The report was quickly rebuffed by Greek and EC officials.
Speaking generally and apparently not referring to a rumored Juncker proposal, European Economic and Monetary Affairs Commissioner Pierre Moscovici said Greece was quick to turn down proposals on reforms but slow to offer alternatives. “They are more eager to say what they don’t want to keep in the program than to propose alternatives,” Moscovici told a news conference in Berlin, while noting that “some progress” had been made in recent days.
In a speech at the annual general meeting of the Federation of Hellenic Enterprises (SEV) Alexis Tsipras was much more upbeat, claiming that Greece was “in final straight toward an agreement,” which, he said, “will come very soon.”
“We are working, with absolute honesty and dedication, to reach a solution,” he said. He echoed the conditions he set out last Friday for a deal, saying it should include debt restructuring, no further cuts to wages and pensions, and an investment plan. He added that Greece is ready to compromise but that he wanted a deal that would allow Greece to return to markets soon.
Liquidity restrictions are not the choice or responsibility of the Greek government but “a tough negotiating tactic” by creditors, Tsipras said.
In a speech at the same event on Monday, Finance Minister Yanis Varoufakis said Greece has to be more competitive and its creditors need to realize that bailouts failed to control the country’s debt. He also reiterated comments of his last week, according to which the European Stability Mechanism should pay Greek bonds held by the European Central Bank that mature in summer.
Once an agreement is reached, Tsipras said, his government will turn to address the “ailments” of the Greek economy, which would involve restructuring ministries, simplifying the public administration and the tax system, fighting cartels and speeding up the dispensation of justice.
Although Tsipras, and many of his ministers, on Monday emphasized the government’s “red lines,” creditors are meanwhile said to be determined on reducing wages, at least those of civil servants, while also pressing authorities to dismiss public workers.