Thursday’s Eurogroup meeting in Brussels did not result in any agreement with a resumption of talks set for Saturday.
Technical teams also met to discuss the details of two different proposals – one from Greece and one from the creditors. Greek government sources said Athens’s proposal was largely unchanged from the document it submitted to creditors on Monday, setting out some 8 billion euros’ worth of measures.
The negotiators had been unable to produce a draft text due to wide differences over pension reform, taxation, labor law, public sector wages, the opening of closed professions, investment, and a Greek demand for a shift of its debt from the ECB to the eurozone's bailout fund.
THE NEW STICKING POINTS
Greek Prime Minister Alexis Tsipras said it was time for a "viable solution" that would lead Greece back to growth within the eurozone with social cohesion, but sticking points with creditors remain:
[1]Tax Hikes
Creditors demand Athens to raise 1.8 billion euros – or 1% of GDP – by increasing value-added tax. Creditors want to tax restaurant meals and hotel accommodation at 23% rather than 13%, a lower rate introduced two years ago by the previous centre-left government led by Antonis Samaras.
Greece's creditors want it to abolish a long-standing special tax exemptions regime that applies on the Aegean Islands.
Concerning corporate taxes Athens asks tax increase to 29% (from 26%) while the creditors want a smaller increase from 26% to 28%.
[2] Military Spending
The creditors want steeper cuts on military outlays, of €400m next year, including through reductions in headcount and procurement. Greece wants to cut military spending in 2016 by only €200m. Most members of the Syriza heartily endorsed defense cuts as a way to meet the fiscal targets of Greece’s international creditors but bigger cuts in military spending might be hard to stomach for Panos Kammenos, the defense minister and leader of Independent Greeks.
[3] Pension Reform
The biggest sticking point remains pension savings. Greece’s creditors are demanding Athens to cut pensions by the equivalent of 1% of gross domestic output, a more rapid clampdown on early retirees and for further cuts in supplementary pensions. But the Greek government says it has gone as far as it can go.
The creditor's main goal is an immediate clampdown on early retirement by moving retirement age to 67 by 2022. Also creditors have been trying to get rid of a “solidarity grant” program that provides a top-up bonus to poorer pensioners, know by the Greek acronym EKAS, by the end of 2017 (rather than by 2020).
Creditors demand Greece to integrate all supplementary pension funds into Greece's Unified Supplementary Insurance Fund (ETEA) and make sure that all supplementary pension funds are only financed by own contributions from the start of 2017 (rather than 2018 as suggested by Mr Tsipras)