BRUSSELS/ATHENS • Greek Prime Minister Alexis Tsipras appealed to his party's lawmakers yesterday to back a tough reforms package after abruptly offering last-minute concessions to try to save his country from financial meltdown.
After walking into a party meeting to applause, Mr Tsipras rallied his Syriza lawmakers to support the new proposals ahead of a snap vote in Parliament on the negotiations, urging them to help keep Greece in the euro zone.
The proposals will be presented today in Brussels to the Eurogroup, the finance ministers of the 19-
nation euro zone, after being analysed by Greece's creditors - the European Commission, International Monetary Fund and European Central Bank - commission spokesman Margaritis Schinas told a press conference yesterday.
On Thursday, Greece had presented the package of proposed spending cuts, pension savings and tax increases to revamp its economy in return for a €53.5 billion (S$80 billion) bailout.
RAISE SALES TAX
The Value Added Tax will rise to 23 per cent from 13 per cent for most goods and services, including for restaurants and caterers. The tax for basic necessities such as food, energy and water will remain at 13 per cent, while medical supplies, books and theatre will be taxed at 6 per cent. This is expected to raise government revenue by 1 per cent of gross domestic product (GDP).
Athens had initially agreed with its creditors' demands to cut its primary surplus (government spending less income from taxes) to 1 per cent of GDP this year, followed by 2 per cent next year, and 3 per cent in 2017. But on Thursday, Greece indicated that these targets would need to be re-examined in the light of the dire economic conditions, including the impact of capital controls and the shutdown of the banking system.
REFORM CIVIL SERVICE
Consultants will be brought in to assess civil servants, and measures are being planned to modernise the public sector. Greece has also promised to rein in its public debt, currently at 180 per cent of GDP, as well as to clamp down on tax evasion and streamline its tax collection systems.
The retirement age will be fixed at 67, or 62 for people who have made 40 years of contributions by 2022. On average, Greek men now retire at 63 and women at 59. Athens said it will "create strong disincentives to early retirement", including adjusting early retirement penalties.
The 13-page document conceded to Greece's creditors several key points that Mr Tsipras' ruling coalition - and Greek voters - had previously opposed fiercely.
While some proposals need immediate legislation for implementation, others can wait to be put into law until after an agreement between Greece and its creditors. They would still need to be pushed through the Greek Parliament before the disbursement of loans.
A make-or-break summit bringing together leaders of all 28 EU nations, and not just the 19 that use the euro, is scheduled for tomorrow but may not be needed if an agreement is reached beforehand.
"We have to make a major decision, whichever way," said Eurogroup head Jeroen Dijsselbloem.
Initial reaction to the package, handed over by Mr Tsipras just two hours before a midnight deadline on Thursday, was mixed.
French President Francois Hollande, one of Mr Tsipras' biggest allies in Europe, cheered the proposals. "The Greeks have shown a determination to want to stay in the euro zone because the programme they are presenting is serious and credible," he said.
Italian Prime Minister Matteo Renzi declared himself "more optimistic" that a deal would be done, but Germany, Europe's largest economy, said the outcome of crisis talks this weekend was "completely open".
Chancellor Angela Merkel has ruled out forgiving more of Greece's debt, saying "a classic 'haircut' is out of the question for me". But her careful choice of words, and an acknowledgement from German Finance Minister Wolfgang Schaeuble that Greece needed debt restructuring, hinted that Berlin might yet consider a different form of relief, perhaps involving pushing back repayments or lowering interest on loans.
Punters are betting that because the proposals put forward by Athens appear to be even tougher than the ones rejected in last Sunday's referendum, Greece's creditors will accept them and continue to give aid to keep the country afloat. REUTERS, AGENCE FRANCE-PRESSE