The reform plan (perhaps) lapsed on which the Greeks will … – Le Figaro

The European Commission has released this weekend the latest reform proposals made to Greece by its creditors in exchange for cash. A map, however, unfinished, negotiations have been broken off by the announcement of Alexis Tsipras to hold a referendum.

While the paradox of the announced referendum Friday evening by Alexis Tsipras is that the Greeks will have to decide Sunday on a draft agreement … now obsolete. According to the speech of Greek Prime Minister Friday, the question should have regard to “the draft agreement presented by the European Commission, the ECB and the IMF at the Eurogroup on 25 June.” Or as recalled the boss of the IMF, these are all “proposals and arrangements that are no longer valid” because the aid plan for Greece in which they were part will stop Tuesday as was decided creditors of Greece after the dramatic turn of Alexis Tsipras.

“In the interest of transparency and information to the Greek people”, the European Commission has however posted on Sunday on its website the content of the draft agreement, although it is not a final document. This project is indeed that “a work in progress”, which was designed to evolve with discussions between Greek leaders and their creditors. It therefore does not necessarily reflect what awaited them if their Greek government had continued to negotiate ….

What does it contain, however at this point that has ruffled the Greek government? What are these reforms that “clearly violate European rules and fundamental rights at work, equality and dignity,” as formulated Premier Hellene in the night from Friday to Saturday?

VAT and pension reform

The draft agreement contains several components, most of which are conflicting pension reform and the rise in VAT. back to balance the pension system Greek (spending on pensions weigh more than 17% of GDP, a figure unmatched in Europe), creditors indeed require the government of Alexis Tsipras it saves the equivalent of one percentage point of GDP on this post. To do this, the European Commission, the ECB and the IMF are demanding several measures. Among them, the end of many early retirement, the immediate application of the retirement age to 67 years of decline (or 62 if the employee has contributed at least 40 years) already planned by previous reforms and suppression In December 2019, the premium paid to small pensions. The minimum pension for poor pensioners should be frozen until 2021 and raised the level of contributions. Economists deem indeed too low, while Greece currently has 3.5 million active for 2.6 million retirees and 1.2 million unemployed …

VAT rise required by creditors is another black spot of the agreement that pushed the Greek government. Creditors wanted next Wednesday, the VAT rate jumps from 6% to 13% in hotels and 13% to 23% in catering, two key sectors for Greek tourism. Three VAT rates would be maintained at 6% (for medicines, books and theater tickets), 13% (for food, energy, water, and hotels), and 23% for other goods and services. Creditors also demanded that the VAT rebate from 30% currently enjoyed by the islands should be deleted. A casus belli. All these tax measures should also report the equivalent of 1% of GDP.

Budget surplus

The creditors also want to see set up various tax measures that would increase the resources of the Greek state, such as capping military spending to 400 million euros, an increase of the tax on corporations from 26% to 28%, the introduction of a tax on television advertising, or an increase of the charge applicable to more yachts 10 meters. At these various taxes had to add a structural component, to strengthen the Greek tax system (and the creation of an independent agency to manage taxes) and to fight against fraud.

Overall, the Greeks were thus achieving a primary budget surplus, that is to say outside debt burden by 1% in 2015, 2% in 2016, 3% in 2017 and 3 5% in 2018. A concession on the part of the Commission, ECB and IMF, which still demanded recently that Greece will achieve the goal of 3.5% from 2015.

All these proposals, however, brought to evolve, if the Greek government agrees to return to the negotiating table. German Chancellor reiterated Monday that it was “obviously prepared to resume discussions” with Alexis Tsipras. “Margins for negotiation exist,” also said the European Commissioner for Economic Affairs, Pierre Moscovici. The ball is now in the camp of the Greeks.