What exactly are Greece's reform proposals?
Will the Greeks be using the Euro or the Drachma? We will have a clearer picture tomorrow. Let's have a quick look though at the proposals put forward by Greece, and what's the difference compared to the previous ones?
The reform proposals seem very similar to the ones that were rejected by Greek voters at the 'Greferendum' just one week ago! Yet there are some differences. Some might be considered small and less relevant, others are fairly substantial and potentially crucial.
1. Debt - Greece is looking for a bailout package to cover its financing needs over the next 3 years. The amount required / requested is a staggering EUR 53.5 Billion! They also want a restructuring of long term debt due past 2022. This is pretty significant vs the previous proposals which were in the region of EUR 15.5 Billion via an extension of the current bailout program of loans. Not only this, but there was also no restructuring in the original proposal.
2. Tax Reforms - The Greeks have generally agreed with the creditors' proposals on sales and corporate taxes.
3. Pension Reforms - They have also agreed to eliminate early retirement benefits. It's estimated this could lead to as much as 0.5% of GDP this year, and potentially 1% the year after. Other benefits will be phased out including a supplementary allowance for low pensions, though this will likely not be for a few years.
4. Labour Reform - Greece and the creditors still conflict here. Greece want to change collective bargaining agreements this year. But the creditors insist that any changes are first negotiated with ECB, the IMF and the EU.
5. Privatisations - The Government will fully adopt creditors' demands for all agreed sales of state assets. This includes the Hellenic Telecommunication Organization and also the selling of regional airports.
6. Fiscal Measures - The Greeks have backtracked on its earlier proposals for military spending cuts. on this area, the gorge is widening. Creditors' had wanted cuts of EUR 200m immediately and EUR 400m by end of 2017. Instead the Greeks have gone from offering half that, to now just a quarter! They do offer to add a luxury tax on recreational vessel over 5m as well as to take steps to close loopholes leading to tax avoidance, predominantly by individual businesses.
In short, progress is being made, but is it enough? What is clear, is Greece's asking price if you like, essentially part 1 above, is staggering, and with only some agreements being made on the other points, I'm not sure agreement can be found. Greece are playing a dangerous game of poker, but then haven't they been for a while now? The final hand could be dealt tomorrow / next week. Let's see who wins...