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Greece fails to agree with the creditors, prepares for elections

04 June 2015 / 11:06:39  GRReporter
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The five-hour meeting between the Greek Prime Minister and the Presidents of the European Commission and the euro zone finance ministers did not result in a convergence of positions. Alexis Tsipras will meet again with Jean-Claude Juncker and Jeroen Dijsselbloem in Brussels on Friday in a new attempt to reach an agreement. "It was a good and constructive meeting. Progress was made in understanding each other’s positions on the basis of different proposals. It was agreed that they (the interlocutors) would meet again. Intense work will continue," reads the message of the European Commission after the critical meeting.

The creditors officially presented their proposal yesterday for the first time, which seems particularly difficult to implement. According to a European official who is familiar with the measures it contains, the creditors insist on lower budget surpluses than before on the one hand, which will require more severe budget cuts to the amount of 3 billion euro on the other. At the same time, the proposal provides for pension cuts and retains the requirement for changes in the social security system and labour legislation, and the Greek government has few options for concessions. In addition, the fact that the proposal does not at all mention the settling of the issue of external debt fully deprives the Greek Prime Minister of the opportunity to define the negotiations as successful.

At the end of the meeting, Alexis Tsipras said that despite the friendly and constructive atmosphere, "the only realistic proposal on the negotiating table is the proposal of Greece," thus directly suggesting that the proposal of the creditors cannot be accepted. The Greek Prime Minister described as positive the discussion for lower budget surpluses, stressing that a country that has lost 25% of its gross domestic product over the past five years cannot accept proposals to cut the benefits for the people who receive low pensions or to increase VAT by 10%. "These proposals cannot be the subject of discussion," said the Greek Prime Minister. He also hinted that there would be no problem with the repayment of the loan to the International Monetary Fund amounting to 300 billion euro on Friday and that the talks "to achieve a mutually acceptable solution" would continue the same day.

The expectations for the meeting to take an important decision further lowered at noon on Thursday when European Commission spokesman Margaritis Schinas said, "Today we do not expect a final decision. This is an initial discussion." Before entering the building of the European Commission, Eurogroup President Jeroen Dijsselbloem made a similar statement for the media, recommending that they should not expect a decision by the end of the day and that there was still much work to do. He had arrived before the Greek Prime Minister, accompanied by head of the Euro Working Group Thomas Wieser and met with Jean-Claude Juncker. The meeting of the President of the European Commission with the Greek Prime Minister began immediately after that, at 9:30 pm Greek time.

Deputy Prime Minister and coordinator of the economic team of the cabinet Yiannis Dragasakis, State Minister Nikos Pappas and government spokesman Gabriel Sakellaridis left along with Alexis Tsipras for Brussels where Deputy Minister of Finance and coordinator of the negotiation team Euclidis Tsakalotos joined them. Although team leader George Houliarakis was not present at the meeting from the beginning, he was urgently called to contribute with his expertise. The meeting between Alexis Tsipras and Jean-Claude Juncker lasted about two hours and it was followed by a dinner at which Jeroen Dijsselbloem was present as well. Upon leaving the building of the European Commission, he said, "The meeting was positive. The discussions will continue in the coming days."

The proposals of both sides

Budget surpluses

Creditors: 1% of GDP in 2015, 2% in 2016, 3% in 2017 and 3.5% in 2018.

Greek government: 0.6% of GDP in 2015, 1.5% in 2016.

What the Memorandum provides for: 3% of GDP in 2015, 4.5% in 2016 and 2017 and 4.2% in 2018.

Creditors: require further budget cuts amounting to 3 billion euro.

"Solidarity" tax

Greek government: proposed increases in the tax on incomes of over 30,000 euro as follows:

2% (instead of 1.4%) on incomes from 30,001 euro to 50,000 euro

4% (instead of 2.1%) on incomes from 50,001 euro to 100,000 euro

6% (instead of 2.8%) on incomes from 100,001 euro to 500,000 euro

8% (instead of 2.8%) on incomes of over 500,001 euro.

VAT

Creditors: 11% (on medicines, food and hotel services) and 23% on all other goods in order to collect revenues amounting to 1.8 billion euro.

Greek government: 6%, 11%, 23%. 6% to apply only to medicines. The special arrangement for lower VAT on the islands will be cancelled on 1 October.

Pension system

Creditors: Keeping the condition of zero deficits of social security funds. They do not accept other measures that will save the same amount to cover the difference.

Creditors: Reducing the cost of pensions by 0.5% of GDP (instead of 0.25%) in 2015 and 1% in 2016.

Labour legislation

Creditors: No change in the recently adopted laws.

Privatisations

Creditors: The independent operator for transmission of electricity, the former Athens airport in Helliniko and peripheral airports.

Recommendations of the Organization for Economic Cooperation and Development for market liberalization

Creditors: Implementation of the recommendations, as envisaged in the Memorandum.

Tags: PoliticsMeeting between Alexis Tsipras and Jean-Claude JunckerProposals by creditorsJeroen Dijsselbloem
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