Greek debt proposal a ‘positive step’
Country must satisfy creditors with financial reforms before receiving funds needed to keep economy afloat
BRUSSELS— Greece and its international creditors seemed on Monday to be edging nearer an agreement in their debt negotiations, after Athens submitted new proposals that would raise money through new taxes and cut costs by fine-tuning the nation’s pension system.
Although eurozone finance ministers said after a short meeting Monday that they would need to reconvene this week to fully assess the proposals, the head of the group sounded more positive than he had after previous meetings.
Jeroen Dijsselbloem, head of the Eurogroup of eurozone finance ministers, said at a news conference that the Greek proposal was “welcome” and a “positive step in the process.” The proposal appeared to be “broad and comprehensive” and a “basis to really restart the talks,” he said.
Another important player in the debt negotiations, Jean-Claude Juncker, president of the European Commission, said after the meeting that he was aiming for a deal with Greece by the end of the week.
For Greece, time and money is fast running out in a debt crisis that has imperiled its continuing membership in the eurozone. Without economic overhauls that its creditors will accept, Greece will not receive a payment of € 7.2 billion ($10 billion) from a bailout program that is due to expire June 30. Without that money, Greece could default on its loans before the end of the summer. That danger holds incalculable risks to the integrity of the eurozone and the political stability of the broader European Union.
But beyond that next loan payout, Greece’s larger goal is to win some measure of relief on its overall foreign debt, which totals more than € 300 billion ($419 billion). It is too soon to know whether its creditors — the other eurozone countries, the European Central Bank (ECB) and the International Monetary Fund — are prepared to grant Greece that relief.
On Monday, to buy time for Greece, the ECB — for the third time in less than a week — increased its emergency funding to struggling Greek banks in an effort to compensate for the billions of euros that have been withdrawn in recent days by anxious depositors.
The leaders of the 19-country eurozone were meeting Monday evening in Brussels for their own emergency session on the Greek crisis, although no final decision was expected.
But entering that meeting, Donald Tusk, president of the European Council, the body that organizes such summit meetings, also signalled cautious optimism. “The latest Greek proposals are the first real proposals in many weeks, although they still need — it’s obvious for me — the assessment of the institutions and further work of course,” Tusk said.
“The most important thing is that the leaders take full political responsibility for the political process to avoid the worst-case scenario, which means uncontrollable, chaotic Grexident,” said Tusk, using a term for a series of unplanned events forcing Greece out of the eurozone.
Looking ahead to that meeting, the German Chancellor Angela Merkel told reporters earlier in the day in Magdeburg, Germany, that “the time to approve the proposals is indeed short.” She cautioned, though, that the meeting would be a discussion, with no decisions made.
The Greek government sent its new proposals Monday morning — too late, apparently, for the finance min- isters to give them full consideration at their afternoon meeting. The group “would have liked to have had them earlier so they could also have a personal understanding of what’s in them,” Dijsselbloem said.
In the latest proposal, the Greek government offered a concession around pensions, which have been a major sticking point in negotiations. Many economists consider the pension system unsustainably lavish for a country that has spent much of the past five years in recession and where a quarter of the working-age population is unemployed.
Under the new proposal, Athens is aiming to find pension savings equal to about 1.4 per cent of the country’s gross domestic product by the end of 2016 — exceeding creditors’ de-
“The most important thing is that the leaders take full political responsibility for the political process to avoid the worst-case scenario.” DONALD TUSK EUROPEAN COUNCIL PRESIDENT
mands. To do so, the government is aiming to increase employer and worker contributions as opposed to cutting pensions outright, according to a person with knowledge of the Greek proposal who spoke only on the condition of anonymity.
Any move to tighten pensions could pose a political test for Tspiras’ leftist party, Syriza, which came to power in January promising to relieve Greece of the austerity imposed by its creditors.
Greek government officials declined to make the new proposal public Monday, but in an interview with the BBC, the economy minister, Giriorgios Stathakis, said the moneyraising measures would include a new tax on businesses, a new tax on the wealthy and increases in certain parts of the value-added tax (VAT) — or sales tax — system.
An EU official familiar with the Greek proposals, who spoke on the condition of anonymity while discussions were underway about the contents, said the creditors and their negotiators were relieved to see suggestions by Greece for adjustments to the pension system and VAT.