Friday 28 October 2016

Proposals sent to eurozone creditors as Greece races to save itself from bankruptcy


The Greek government has sent a package of reform proposals to its eurozone creditors in a race to win new funds to avert bankruptcy and will seek a parliamentary vote today to endorse immediate actions.

In the latest proposals, Greece has asked for €53.5bn 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 demands to phase out tax breaks 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.

Greek lawmakers will be asked today to authorise the leftist government to negotiate a list of "prior actions" it would take before any fresh aid funds are disbursed, a key step to convince sceptical lenders of its serious intent.

Leftist Prime Minister Alexis Tsipras (inset) spent yesterday with his cabinet drafting a last-ditch package of measures on which Greece's survival in the eurozone hinges.

A further vote would be needed to turn them into law if eurozone leaders agree at a summit on Sunday that the proposals are a basis for starting 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 plug on the government if the island tax breaks 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 offer also included defence spending cuts, a firm 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 20 bond redemption to the ECB €3.49bn, which it cannot make without aid.

The country has had two bailouts worth €240bn from the eurozone and the IMF since 2010, but its economy has shrunk by a quarter, unemployment is more than 25pc and one in two young people is out of work.

Germany, Athens biggest creditor, meanwhile made a small concession by acknowledging that Greece will need some debt restructuring as part of the new 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 saying that.

"There cannot be a haircut because it would infringe the system of the European Union," he added.

He offered no solution to the conundrum, which implied that Greece's debt problem might not be soluble within the eurozone.

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