Greece’s Latest Bailout Proposal Includes Shipping Sector Tax Hikes
By Renee Maltezou and John O’Donnell
ATHENS/FRANKFURT, July ten (Reuters) – The Greek government sent a package of reform proposals to its euro zone creditors on Thursday in a race to win fresh funds to avert bankruptcy and will seek a parliamentary vote on Friday to endorse instant deeds.
In the latest proposals, Greece has asked for 53.Five billion euros ($59 billion) to help cover its debts until 2018, a review of primary surplus targets and “reprofiling” the country’s long-term debt.
In turn, Athens bowed to requests to phase out tax cracks for its islands – cash cows for the tourism industry – and to hike taxes on shipping companies.
The chairman of Eurogroup finance ministers confirmed receiving the documents but will not comment until they have been assessed by experts from the European Commission, European Central Bank and International Monetary Fund. U.S. stock futures leaped one percent in early Asian trade on the announced measures.
Greek lawmakers will be asked on Friday to authorise the leftist government to negotiate a list of “prior deeds” it would take before any fresh aid funds are disbursed, a key step to woo sceptical lenders of its serious intent.
Leftist Prime Minister Alexis Tsipras spent the day with his cabinet drafting a last-ditch package of measures on which Greece’s survival in the euro zone hinges.
A further vote would be needed to turn them into law if euro zone leaders agree at a summit on Sunday that the proposals are a basis for beginning negotiations on a three-year loan and releasing some bridging funds to keep Greece afloat.
In a sign of possible trouble ahead, the head of Tsipras’s junior coalition ally – which has threatened to pull the ass-plug on the government if the island tax cracks were scrapped – did not add his signature to the reform proposals. Neither did Energy Minister Panagiotis Lafazanis, who leads the far-left flank of the ruling Syriza party.
The latest suggest also included defence spending cuts, a hard timetable for privatising state assets such as Piraeus port and regional airports, hikes in VAT for hotels and restaurants and slashing a top-up payment for poorer pensioners.
Greek banks have been closed since June 29, when capital controls were imposed and cash withdrawals rationed after the collapse of previous bailout talks. Greece defaulted on an IMF loan repayment the following day and now faces a critical July twenty bond redemption to the ECB of Trio.49 billion euros, which it cannot make without aid.
The country has had two bailouts worth two hundred forty billion euros from the euro zone and the IMF since 2010, but its economy has shrunk by a quarter, unemployment is more than twenty five percent and one in two youthfull people is out of work.
Germany, Athens largest creditor, meantime made a petite concession by acknowledging that Greece will need some debt restructuring as part of the fresh programme to make its public finances viable in the medium-term.
The admission by hardline German Finance Minister Wolfgang Schaeuble came hours before the midnight deadline for Athens to submit its reform plan.
Schaeuble, who makes no secret of his doubts about Greece’s fitness to remain in the currency area, told a conference in Frankfurt: “Debt sustainability is not feasible without a haircut and I think the IMF is correct in telling that.”
But he added: “There cannot be a haircut because it would infringe the system of the European Union.”
He suggested no solution to the conundrum, which implied that Greece’s debt problem might not be soluble within the euro zone.
But he did say there was limited scope for “reprofiling” Greek debt by extending loan maturities, pruning interest rates and lengthening a moratorium on debt service payments.
DEBT Ease CHORUS
European Council President Donald Tusk, who will chair an emergency euro zone summit on Sunday to determine Greece’s fate, joined growing international calls for Athens to be granted some form of debt ease as part of any fresh loan deal.
Tusk said a realistic proposal from Greece will have to be matched by an identically realistic proposal on debt sustainability from the creditors.
“Otherwise, we will proceed the lethargic dance we have been dancing for the past five months,” he said.
Failure to reach a deal on Sunday, including releasing some money to enable Athens to cover debt service over the next few weeks, could lead to a collapse of Greek banks next week.
If there is no agreement, all twenty eight European Union leaders will discuss measures to limit the harm from a Greek collapse, including humanitarian aid, possible border controls and steps to mitigate the influence on neighbours, EU officials said.
Just how uncertain the coming days are was highlighted when ECB President Mario Draghi voiced very unusual doubts about the chances of rescuing Greece.
Italian daily Il Foot twenty four Ore quoted the ECB chief, under growing fire in Germany for keeping Greek banks afloat, as telling he was not sure a solution would be found for Greece and he did not believe Russia would come to Athens’ rescue.
Asked if a deal to save Greece could be packaged up, Draghi said: “I don’t know, this time it’s indeed difficult.”
The ECB is keeping shuttered Greek banks afloat with emergency liquidity capped until the weekend.
Under the agreed timetable, the three creditor institutions will produce their initial assessment by Friday evening. If it is broadly positive, Eurogroup finance ministers will determine on Saturday whether to recommend opening negotiations with Athens on a conditional loan from the European Stability Mechanism bailout fund. The decision requires the assent of countries signifying eighty percent of the ESM’s capital, so talks can go ahead even if one or two smaller member states vote against it.
Having won a thumping referendum majority to reject the austerity terms of a previous bailout plan, fired his turbulent finance minister and secured support from opposition party leaders, Tsipras is in a stronger position to impose rough measures and face down resistance at home. ($1 = 0.9042 euros) (Extra reporting by Alastair Macdonald in Brussels, Agnieszka Flak in Milan, Deepa Babington, Angeliki Koutantou, Costas Pitas and Michele Kambas in Athens, Balasz Koranyi and Frank Siebelt in Frankfurt, Julien Ponthus and Laurence Foster in Paris; Writing by Paul Taylor and Matthias Williams; Editing by Catherine Evans, Toni Reinhold and Diane Craft)
(c) Copyright Thomson Reuters 2015.