Jean-Claude Juncker attempts to cut the Gordian Knot and provide a solution
At around noon on Monday, the European Commission sent all parties involved in the negotiations a multi-page document with a series of proposals in order provide a solution.
The document specifically sets the conditions in order to unblock financial aid from the EFSF towards Greece within June and for a comprehensive agreement by autumn.
The first condition is to take (ie legislate) the agreed a first list of measures that aim to generate about 5 billion euros, by June, in order to cover the fiscal gap for 2015 and 2016.
The second condition for a comprehensive agreement is to implement, by fall (September – October) major structural changes in the economy. These reforms will be outlined in the OECD's list and are already agreed upon with Greece's European partners, such as changes in the pension system and the job market.
Aims of the program. The EC's list of proposals outlines the fiscal targets for the next four years, which are as follows:
· 2015: 0.75% of GDP primary surplus
· 2016: 2% of GDP primary surplus
· 2017: 3.5% of GDP primary surplus
· 2018: 3.5% of GDP primary surplus
Measures worth 5 billion euros. The measures that are included in the proposal aim to cover the fiscal gap and achieve primary surpluses by the end of 2016. They include:
· Implementing the VAT after the summer (possibly on the 1st of October), which includes an 18% rate for cash purchases, 15% for card transactions and a low 6.5% rate for certain products.
· Withdrawing a 30% discount on the solidarity tax on incomes over 30,000
· Maintaining the ENFIA real estate tax
· Reevaluating the 'zero deficit' clause in supplementary pensions, as part of the overall discussion on the sustainability of the Greek pension system in the autumn
· Reevaluate collective labor agreements issue, in light of the ILO's recent report on 'better practices' in the EU's job market, the need to increase the Greek economy's competitiveness and to tackle the major unemployment problem.
· Establish the General Secretariat of Public Revenue as an independent authority
· Create a Fiscal Council, that will also operate as an independent authority
· Take a series of measures to address the humanitarian crisis – within the framework of the Juncker package – and create a safety net for vulnerable social groups
The document – which is essentially a review report and a template for a new agreement - also notes that there is a convergence of view regarding banks and bad loans.
The IMF's reservations. The documents also includes a section outlining reservations expressed by the International Monetary Fun, which are that the proposal is very different to the current program. It is essentially a new road map, with very little details on measure and policies, which will require further studies. The fiscal adjustment is "back-loaded", ie transferred the future. As such, the European side believes that the IMF will not fund Greece, but at the same will not publicly express its objections and will recommend that the EFSF supports Greece.
Resources. The European Commission proposes that the following payments be made in June:
· The outstanding tranche of 1.8 billion euros
· The 1.9 billion euros from the SMP program for 2014
· After June, funds from the SMP program for 2015
The Greek government, European Central Bank and IMF have all received the European Commission's proposal and announcements expected in the next few days – if not hours - for a Euro Working Group and Eurogroup where the final decisions will be made.
Source: www.tovima.gr/en
“To Vima” exclusive: The EC’s proposal for an agreement
At around noon on Monday, the European Commission sent all parties involved in the negotiations a multi-page document with a series of proposals in order provide a solution.
The document specifically sets the conditions in order to unblock financial aid from the EFSF towards Greece within June and for a comprehensive agreement by autumn.
The first condition is to take (ie legislate) the agreed a first list of measures that aim to generate about 5 billion euros, by June, in order to cover the fiscal gap for 2015 and 2016.
The second condition for a comprehensive agreement is to implement, by fall (September – October) major structural changes in the economy. These reforms will be outlined in the OECD's list and are already agreed upon with Greece's European partners, such as changes in the pension system and the job market.
Aims of the program. The EC's list of proposals outlines the fiscal targets for the next four years, which are as follows:
· 2015: 0.75% of GDP primary surplus
· 2016: 2% of GDP primary surplus
· 2017: 3.5% of GDP primary surplus
· 2018: 3.5% of GDP primary surplus
Measures worth 5 billion euros. The measures that are included in the proposal aim to cover the fiscal gap and achieve primary surpluses by the end of 2016. They include:
· Implementing the VAT after the summer (possibly on the 1st of October), which includes an 18% rate for cash purchases, 15% for card transactions and a low 6.5% rate for certain products.
· Withdrawing a 30% discount on the solidarity tax on incomes over 30,000
· Maintaining the ENFIA real estate tax
· Reevaluating the 'zero deficit' clause in supplementary pensions, as part of the overall discussion on the sustainability of the Greek pension system in the autumn
· Reevaluate collective labor agreements issue, in light of the ILO's recent report on 'better practices' in the EU's job market, the need to increase the Greek economy's competitiveness and to tackle the major unemployment problem.
· Establish the General Secretariat of Public Revenue as an independent authority
· Create a Fiscal Council, that will also operate as an independent authority
· Take a series of measures to address the humanitarian crisis – within the framework of the Juncker package – and create a safety net for vulnerable social groups
The document – which is essentially a review report and a template for a new agreement - also notes that there is a convergence of view regarding banks and bad loans.
The IMF's reservations. The documents also includes a section outlining reservations expressed by the International Monetary Fun, which are that the proposal is very different to the current program. It is essentially a new road map, with very little details on measure and policies, which will require further studies. The fiscal adjustment is "back-loaded", ie transferred the future. As such, the European side believes that the IMF will not fund Greece, but at the same will not publicly express its objections and will recommend that the EFSF supports Greece.
Resources. The European Commission proposes that the following payments be made in June:
· The outstanding tranche of 1.8 billion euros
· The 1.9 billion euros from the SMP program for 2014
· After June, funds from the SMP program for 2015
The Greek government, European Central Bank and IMF have all received the European Commission's proposal and announcements expected in the next few days – if not hours - for a Euro Working Group and Eurogroup where the final decisions will be made.
“To Vima” exclusive: The EC’s proposal for an agreement
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