Tuesday, 2 June 2015

Tsipras to meet Juncker to bridge differences with creditors

Greek Prime Minister Alexis Tsipras is to visit European Commission President Jean-Claude Juncker on Wednesday night in Brussels to try and break a deadlock in talks to finance the debt-stricken nation.

Greek finance ministry sources confirmed late on Tuesday that the country’s creditors had sent an eleventh-hour counter-proposal to a Greek one sent on Monday night. 

The offer from the International Monetary Fund, the European Commission and the European Central Bank reportedly has significant differences from the Greek one. 

"We have submitted a realistic plan for Greece's exit from the crisis," Greek Prime Minister Alexis Tsipras told reporters on Tuesday morning. He said the final form of the plan, which was "comprehensive", contained "difficult" compromises, and had been submitted on a self-imposed deadline, on Monday night.

"We're not waiting for [the institutions] to submit a plan, as stated in the Eurogroup decision. Greece is submitting a plan," Tsipras said. 

His office said the plan was along the lines of an article submitted to Le Monde on Sunday. 

Tsipras’ government did not deny leaks on Tuesday that the Greek plan suggested a primary budget surplus of 0.85 percent of GDP this year and 1.5 percent next year, rising to about 3.5 percent in 2018.

The primary surplus is the state’s revenue from taxes that is left over after domestic expenses, and would be spent to repay Greece’s onerous debt, which now stands at 312bn euros. 

The leftwing government in Athens, elected in January, has made clear its desire to spend no more than about 1.2-1.4 percent of the economy repaying the debt. It wants to spend any further surplus financing growth and jobs.  

Creditors insist on a primary surplus of 3.5 percent immediately, according to information made public by the Financial Times on Tuesday. If true, it means that creditors have not shifted from austerity terms imposed upon previous Greek governments, despite four months of painful negotiations.

Greece's creditors also believe it will face a 1.8bn euros revenue shortfall in consumer (VAT) tax. Athens believes the shortfall is in the order of 1bn euros, the finance ministry source says, and has suggested a three-tier tax (6, 11 and 23 percent) to counter the problem.

Greece in desperate situation

The undenied leaks in Athens give an inkling of the latest compromises Greece has offered. It would ditch plans for a bonus to retirees amounting to a 13th pension. It would preserve a highly unpopular property tax for the foreseeable future. And it would put off until next year a restoration of minimum wage to the pre-crisis level of 731 euros a month, bringing up the current 586-euro wage in stages.

A February 20 decision by the single currency bloc's informal conference of finance ministers, the Eurogroup, foresaw an interim agreement at the end of April and a final agreement in June. Increasingly it appears that Greece will skip the interim agreement, which would have released 7.2bn euros in loan instalments. Without them, it cannot pay its way through the summer.

Greece owes the three institutions 1.6bn euros in June, 4bn euros in July and 3.4bn euros in August. It is currently able to finance its domestic spending from tax revenues, because it cut approximately 40bn euros' worth of government spending over three years to balance the budget; but it cannot additionally bear the weight of loan repayment, which makes its debt unsustainable.

The leftwing Syriza government was elected in January to soften austerity policies, restore economic growth and reschedule the debt so that Greece can pay it off over a longer period.

However, the Greek economy has stalled since elections were called in December, pending a new deal. An original growth forecast of 1.5 percent for this year has been cut back to 0.5 percent.

Hard left warns Tsipras

Syriza MPs were gathering signatures on a petition to convene the party's parliamentary bloc on Thursday, Greek media reported on Wednesday morning. The government has said it will put any deal to a legislative vote, and Syriza MPs would be called upon to vote for it.

Meanwhile, Syriza's own stalwart leftists warned Tsipras late on Monday night not to concede too much.

In an announcement on its website, iskra.gr, the Left Platform, an integral part of the ruling Syriza party, decried what it sees as attempts to blackmail the government into signing a new austerity package.

It lashed out at the troika, which has temporarily cut off funding until Greece complies with unfulfilled austerity measures from two previous agreements.

"In such critical moments, as our creditors' attempts at blackmail become increasingly evident, the Greek government can only follow one path and this is what it will do: Reject the troika's ultimata, rely on the support of the people and let everyone know that any deal must either be compatible with Syriza's policies and the January 25 election, or not exist."

Germany's Chancellor Angela Merkel, France's President Francois Hollande, European Commission President Jean-Claude Juncker, and IMF managing director Christine Lagarde along with the ECB's president, Mario Draghi, all met in Berlin on Monday night to discuss the Greek situation.

John Psaropoulos

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