Greece offers few reform details with new bailout bid
Tsipras warns that higher taxes, pension cuts would further weaken the economy
ATHENS, GREECE— Running out of money and under a tight deadline from European leaders, Greece requested a three-year loan on Wednesday from the eurozone’s bailout fund.
The action by the country and its creditors could be the last effort to avert a historic rupture.
But in making a formal request for new aid that it needs to avoid further defaults on its debts, Greece did not provide details of what it would do to strengthen the government’s finances, other than alluding to a willingness to make quick changes to its tax and pension systems.
The government said it would provide those specifics Thursday.
Nor did Greece publicly describe the size of the loan it was seeking. Some economists have estimated Greece will need 50 billion (about $70 billion Canadian).
Late Tuesday, before the latest loan request, eurozone leaders had rebuked the Greek Prime Minister, Alexis Tsipras, for not providing a new and specific proposal to secure additional bailout money.
Until Athens submits that proposal Thursday, the final deadline the eurozone creditors have set, it remains to be seen whether Greece can come close enough to meeting demands for pension cuts, tax increases and other changes to secure a bailout.
Negotiations have gone on for five months.
Without a deal, which European leaders said they would decide on by Sunday night, Greece seems des- tined to stumble out of the euro currency union and face an uncertain future as a bankrupt stand-alone economy.
“The last-chance procedure has just started,” Donald Tusk, the president of the European Council, told the European Parliament shortly after Athens sent its formal request for a new bailout.
If granted, it would be Greece’s third bailout since it was crippled by the financial crisis more than five years ago.
Tsipras took his case to the European Parliament on Wednesday. In a defiant speech, he said his government was determined to reach a “viable agreement” with the country’s creditors. But he also insisted any deal should include debt relief and he emphasized the Greek crisis was essentially a European problem.
“We want an agreement that will give a final end to the crisis and show there is light at the end of the tunnel,” Tsipras told the packed chamber in Strasbourg, France. But he said that a deal could not come at any price, noting Greece had been “transformed into a laboratory for testing austerity over the past years.”
New Greek Finance Minister, Euclid Tsakalotos, submitted the loan request to the eurozone bailout fund, the European Stability Mechanism.
In a letter accompanying the request, Tsakalotos mentioned one of Greece’s other main goals in securing a new bailout loan: relief from some of its staggering public debt, which is more than € 300 billion. “Greece welcomes an opportunity to explore potential measures to be taken so that its official sector related debt becomes both sustainable and viable over the long term,” the letter said.
The basic disagreements between Greece and its creditors have been well established through months of negotiations. Before providing additional bailout money, the creditors want Greece to show it can strengthen its finances and handle more debt.
The main points of contention involve Greece’s overburdened pension system, which has been a big drain on the government’s finances, and proposed increases to elements of the country’s value-added tax, some of which are opposed by regional and other interest groups.
“We want an agreement that will give a final end to the crisis and show there is light at the end of the tunnel.” ALEXIS TSIPRAS PRIME MINISTER OF GREECE
The Greek government, elected this year on a platform of ending years of austerity imposed by Germany and other lenders, is pushing back against further pension cuts and higher taxes, saying they would further weaken a crippled economy.
It is also seeking a quick infusion of aid to help cover bills and loan repayments in the short run and a reduction in its debt payments for the long run. “We have ideological differences,” Tsipras told the Parliament.
The differences are not huge in absolute terms, but they are complicated by an almost total breakdown in trust between the two sides.
In its letter seeking new bailout money on Wednesday, Greece, without offering any details, said it was ready “to immediately implement a set of measures as early as the beginning of next week” to address creditors’ demands for pension cuts and tax increases.