Back to Athens after a meeting with Greece's creditors, Prime Minister Tsipras faced fury from members of his own Syriza party.
The five-page ultimatum from creditors, presented by the European commission president, Jean-Claude Juncker, was described as shocking, provocative, disgraceful and dishonorable.
Several of the measures included in the creditors' five-page plan cross the party's declared “red lines” forcing PM Tsipras to affirm that the creditors’ plan cannot be the basis for an acceptable deal. So he’s sticking to his government's, 47-page proposal.
Budgetary Surplus
The creditor's proposal calls for primary surpluses - the excess of revenues over expenditures before interest payments are made - of 1% in 2015, 2% in 2016, 3% in 2017 and 3.5% in 2018, according to an official with knowledge of the proposal.
These rates are lower than the targets of 3% in 2015 and 4.5% from 2016 onward that had been foreseen in Greece’s existing bailout program, which has been extended until the end of June. Still, they are higher than what Athens was hoping to achieve and would force the government to make more spending cuts amid a shrinking economy, risking a major backlash from its left-wing party and Greek voters.
Pensions
One key target of additional cuts under the proposal is Greece’s pension system, which Mr. Tsipras and his allies had promised to shield from further measures. Under the plan, Greece would have to reduce pension spending as of July, delivering savings of 0.25% to 0.5% of gross domestic product this year and 1% of GDP next year. Creditors want to eliminate early retirement and phase out solidarity grants for all pensioners.
Labor market
Greece’s creditors appear to have made some concessions on planned changes to the country’s labor market. The proposal foresees no further reduction to the number of public-sector workers. Instead of immediately pushing for new laws to make it easier to fire workers, the plan calls for a consultation that would revisit the framework for collective bargaining and collective dismissals.
The Greek government wants to reinstate collective bargaining procedures similar to those that exist in other EU countries. It also wants to increase the minimum wage, a promise that was one of the main pillars of Tsipras’ election campaign.
Tax hikes
Greece’s creditors want to implement a 23% value-added tax across the board, affecting all goods and services except for food, medicine and hotels, which would be taxed at an 11% rate.
Greece has been pushing for a system of three rates, which European officials say falls short of the extra €1.8 billion, or about 1% of GDP, that creditors have been asking for.
Increasing the income tax for businesses, increased tax payment at 100% for companies and freelancers. Today the advance tax rates are: 55% for individual - self-employed, 65% for OE and EE.,. 80% for SA Ltd. and 100% for banks).
The Greek government should also adopt an enabling law creating the main framework of an independent Public Revenue Agency
Privatization
Take steps to complete sale of stakes in strategic assets such as the port of Piraeus and regional airports this year and announce new privatization timeline for completing ongoing tenders.
(WSJ, Market Watch, Intelligent News)