Greece has submitted a new set of reform proposals for economic policy overhauls and budget cuts to European leaders as it attempts to stave off exit from the euro zone.
Details of Greece's reforms were submitted to Greece’s creditors and the Hellenic Parliament in Athens late last night, giving time for European leaders to assess the proposals ahead of a European Union summit set for Sunday.
The 13-page plan is similar to the European Commission's June 26 proposal which 61% of the Greek people said no to rejected in a referendum at the weekend. It includes concessions the left-leaning government of Prime Minister Alexis Tsipras had previously refused to accept. For example it meets longstanding demands by creditors to implement reforms that discourage early retirement, and asks for higher health contributions from pensioners.
The package is a 3 year, €53.5billion bailout program, including €35 billion of growth measures, lasting through June 30, 2018 requesting funds from the European Stability Mechanism.
It maintains a primary budget surplus target of 1% in 2015, rising to 2%, 3%, and 3.5% by 2018.
In the VAT system, Athens vows – as the creditors demanded – to find new revenues amounting to 1% of gross domestic product (about €1.8bn) every year. Greece will keep VAT on hotels at a 13% rate but will raise VAT on restaurants to a maximum rate of 23% and eliminate discounted rates for islands, apart from the most remote ones. Many other countries have similar reduced VAT schemes to support isolated territories (such as Spain’s concessions to the Canary Islands).
Greece also concedes to a creditor demand to allow processed foods to be taxed at the standard 23%.
Athens has also agreed to raise raising corporation tax to 28% and implement more measures to fight tax evasion.
Greece has also given in to demands to sell the state's remaining shares in the dominant telecommunications provider (OTE). The agreement also includes privatization of regional airports and seaports.
The government also pledged to start overhauling its pension system as of this month. Athens appears to have conceded in implementing measures to raise the effective retirement age to 67 by 2022 and phasing out a “solidarity grant” (EKAS) to the poorest retirees between March 2016 and the end of 2019. Nevertheless The 2012 pension reform legislation will not be implemented until October 2015 under the Greek plan, whereas the creditors wanted it done immediately.
Meanwhile, the plan which does not request or even hints about debt relief, may face opposition from hardliners in the government as well as the Greek people where two thirds of the voters just voted 'No' to a deal which the government itself is now hoping will pass.
Greek lawmakers are expected to vote on the package of reforms on Friday. Any new deal would also have to be endorsed by national parliaments including the German Bundestag, where attitudes toward Greece have hardened.
Read the full proposal submitted by the Greek government to the Eurogroup on Thursday HERE.