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full text of Greek proposal <http://greece.greekreporter.com/files/Full-Greek-proposal.pdf> 1) Deal or no deal: A breakdown of the latest Greece proposals by Peter Spiegel in Brussels Financial Times, June 23 <http://www.ft.com/cms/s/0/dc12711c-19ab-11e5-a130-2e7db721f996.html> The 11-page proposal of economic and budget reforms submitted by Alexis Tsipras, the Greek prime minister, to his international bailout creditors on Monday estimates it will save nearly €7.9bn over the course of the next two years, by far the biggest combination of tax hikes and spending cuts offered by his government to date. In many respects, it mirrors a compromise plan offered by creditors to Mr Tsipras three weeks ago; indeed, in some places, the paper appears to lift verbatim language on pension reforms and value added tax changes from the creditors’ own proposal. But in substance, Mr Tsipras’ plan relies far more heavily on raising taxes — and not cutting spending — than bailout monitors had suggested. In a country that has a spotty record in collecting taxes, that has raised concern among some of the creditors, as has the potential recessionary effect high new taxes could have on the economy. Here is a quick breakdown on where Greece has moved, and where the creditors stand, on the key issues still in dispute. Primary surplus This may be the most important metric to watch. The primary budget surplus — government revenues minus its expenses when interest on national debt is excluded — is the target that all other policies must eventually aim at. But it can also be misleading. Although the rival targets look surprisingly close, analysts believe the Greek plan will not actually produce the numbers it claims. Creditors offer: The latest plan called for a surplus of 1 per cent of gross domestic product this year, a significant cut from the bailout’s current 3 per cent target. But since Greece is projected to post a 0.7 per cent deficit this year, that means a lot of austerity would be required. Greece would need to get to 3.5 per cent in 2018 via two steps: 2 per cent next year, and 3 per cent in 2017. Where Greece was: Originally, Greece was also targeting a surplus of 3.5 per cent of GDP by 2018, but it proposed taking a far more gradual approach to get there. This year, under its first counterproposal, Athens would have only needed to post a 0.6 per cent surplus, followed by 1.5 per cent next year and 2.5 per cent in 2017. Under pressure from Jean-Claude Juncker, the European Commission president, Greek negotiators then attempted to split the difference and called on creditors to meet them halfway. Where Greece is now: The new Greek proposal accepts the creditors’ surplus targets in full. In order to hit those targets, it has tax increases and some spending cuts that will total 1.5 per cent of GDP this year and 2.9 per cent next year. It estimates that other administrative reforms will save 0.9 per cent this year and 1.3 per cent in 2016. Pension reform Possibly the most contentious issue of all, and the one on which Athens moved the most in its new proposal. The governing Syriza party campaigned on a promise to restore the “13th month” pension bonus payment to more than 1.2m pensioners receiving less than €700 per month. But the IMF, in particular, has stuck to a hard line, insisting the pension system post a “zero deficit”, which would prevent Syriza from fulfilling its campaign promise. Creditors: Their offer called for a series of cuts, that would lead to a reduction totalling 1 per cent of GDP, or about €1.8bn, by 2016 and 2017. These include “significantly tightening” early retirement rules, which provide incentives for a whole raft of workers to drop out of the workforce, and increasing the amount pensioners have to pay for healthcare. Where Greece was: Just over a week ago, the only pension reform offered was cutting back on some of the early retirement schemes, saving a mere €71m next year. Under that plan, the effective retirement age would be gradually raised to 67, but that target would not be reached for another 20 years. Where Greece is now: The new plan features a more aggressive attempt to raise the effective retirement age, promising “strong disincentives” for early retirement and targeting the retirement age of 67 by 2025, rather than 2036. That would save €300m next year, Athens estimates. Far bigger is a 3.9 per cent contribution increase to the main public sector pension plan, which will raise €800m next year, and hikes in healthcare contributions that would yield another €510m. Value added tax Greece has one of the lowest rates of VAT payment in the EU, a problem the European Commission has blamed on both widespread evasion as well as a complicated system with multiple exemptions for certain products and regions. Over the course of the crisis, collection rates have dropped even lower. Creditors offer: The plan focused on increasing VAT revenues by 1 per cent of GDP by eliminating exemptions and simplifying rates to just two: a standard rate of 23 per cent, with a reduced rate of 11 per cent for essential items like food and medicines. Controversially, it would eliminate the exemption for Greek islands, which have fiercely resisted to protect a vital tourism industry. Meanwhile, electricity was included in the higher 23 per cent rate. Where Greece was: Originally, Athens proposed three different rates rather than two — a “super-reduced” rate of 6 per cent for medicine and books. But electricity was kept in a lower 11 per cent bracket and there was no mention of what would be done for the special exemptions for Greek islands. Where Greece is now: Athens keeps the three-tier structure, but raises the middle rate to 13 per cent. It also narrows the products that are exempt from the standard 23 per cent rate — though importantly electricity remains in the middle bracket. In what would be a big concession, the document says Greece will “eliminate discounts, including on islands”. But officials say Mr Tsipras has backtracked in talks with creditors. Taxes Tax collection has long been the bane of the Greek programme. Preceding Greek governments have resorted to creative revenue-generating schemes that proved politically poisonous. In 2011, for example, the centre-left Pasok government implemented a new property tax that was added to electricity bills to ensure collection, which prompted a revolt. Syriza garnered campaign support by promising to end a new version of the property tax imposed by the centre-right government that followed. Creditors offer: Mindful of previous political firestorms, creditors did not seek additional new business, income or property taxes, but insisted that existing tax schemes not be rolled back. In addition, they demanded an end to tax amnesty schemes, which Greek governments have rolled out with regularity, creating significant disincentives for anyone to pay their taxes on time. Where Greece was: Previous proposals were virtually mum on what the government intended to do regarding the hated property tax and instead began layering on a series of taxes against the wealthy and companies. These included a one-off tax on profits above €1m, an increase in the corporate tax rate from 26 per cent to 29 per cent, and raising the luxury tax on things like yachts and swimming pools from 10 per cent to 13 per cent. Where Greece is now: The new proposal appears to maintain the current property tax regime through at least next year, promising to “safeguard the 2015 and 2016 property tax revenues at €2.76bn”. It also retains the increased corporate and luxury taxes, and goes a bit further on the one-time profits tax, which will now be 12 per cent on all profits above €500m. The new profits tax alone is estimated to raise €1.3bn over the next two years. Privatisations The Greek privatisation drive has been one of the biggest failures of the bailout programme. Four years ago, creditors predicted it would bring in €50bn in revenues. The last programme review, a year ago, predicted just half that. Syriza originally vowed to freeze all privatisations, but government leaders have gradually moved off that stance. Creditors offer: Pending privatisations would need to be approved quickly, including some regional airports, the ports of Piraeus and Thessaloniki, and the rail operator. The proposal retained an overall target of €22bn in total revenues, though it pushed back the target date from 2020 to 2022. Specific targets for 2016, 2017 and 2018 are left to be negotiated. Where Greece was: For a government with ministers who still occasionally promise to kill any privatisation programme, the Greeks made surprising concessions. They suggested nearly €3.2bn could be raised through sales in the next two years, including €1.2bn from the regional airports, and another €2.1bn the following three years. It would fall short of the €22bn target by 2022, but not by much. Where Greece is now: The latest proposal does not break out individual sales. But it appears to accelerate the privatisation programme significantly beyond previous offers. Although this year’s target remains €1.4bn, next year it promises to bring in €3.7bn — or more than double what Athens had promised in earlier proposals. In 2017, it is targeting €1.2bn in sales, when previously it was promising only €176m. 2) Greece debt crisis: the offer from Athens in detail Here are the exact details of the concessions offered by Athens. Can they end the five-month stalemate and avert a Grexit? by Phillip Inman The Guardian, June 23 <http://www.theguardian.com/business/2015/jun/23/greece-debt-crisis--offer-athens-details> Taken from the 11-page document submitted by the government of Prime Minister Alexis Tsipras on Monday, these are the proposals: Pension reform What Greece is offering: • Increasing national healthcare contributions – a levy paid by pensioners – to an average of 5% of pension income, up from 4% • Introducing healthcare contributions for supplementary pensions, at a rate of 5% • Raising social security contributions for supplementary pensions from 3% to 3.5% • Increasing pension contributions for those working towards retirement by 3.9%. Will it work? These are clearly defined tax-raising measures that could generate large tax receipts for the Athens exchequer. The task will be to convince Greeks who will be hit hard by extra pension contributions, albeit via the health levy. VAT What Greece is offering: •The standard rate of 23% will be widened • However, “to protect the disposable income of low- and middle-income households” there will be a reduced rate of 13% on energy, basic foods, catering and hotels • A reduced rate of 6% will be charged on medical supplies and books • In order to “promote fairness”, VAT discounts for various Greek islands will end. Will it work? Higher rates for the islands are already generating protests. The higher VAT rates will do much of the heavy lifting in the new deal, raising the equivalent 0.74% of GDP, according to the document. This assumes the Greeks continue to consume at their current level, which could be over-optimistic if the economy remains in recession and the few still in employment fear for their jobs. Corporate taxes What Greece is offering: • An increase in the corporation tax rate from 26% to 29% combined with a special tax of 12% on corporate profits above €500,000. The total tax raised should be €815m in 2015. Will it work? As with all taxes, there is an assumption that the taxpayer will hang around long enough to pay up. It could be that the prospect of a brighter future for Greece attracts foreign investment, or at the very least keeps businesses in the country and paying tax. But higher taxes and a tough next few years of recession could persuade international companies to leave Greece or force domestic firms out of business, denting the expected figure for extra income. Additional measures What Greece is offering: •Supplementary income tax payments imposed under the previous bailout programmes are to be raised. A “solidarity supplement” that starts at 1% of income and rises to 3% in addition to standard income tax rates will go up in a “progressive” fashion to limit the impact on lower-income groups, raising €220m this year and €250m in 2015 • In 2015 there will be €200m more shaved off the defence budget • Increase the tax on luxury recreational vessels (yachts) over 10 metres-long yachts from 10% to 13%, raising an extra €47m. Will it work? The higher solidarity supplement will hurt those in work, who must pay the higher rate. This could be difficult to get past the hardline Left Platform group of Syriza MPs, who will agree to defence cuts, but may not stomach a further tax on incomes. They will agree with another strike at the defence budget, which had soared to the sixth largest in the world 10 years ago. It took some steep cuts, but is still comparatively large. A higher tax on yachts will also play well with Syriza parliamentarians. 3) Greece debt crisis: 11 keypoints in Alexis Tsipras’s cash-for-reform proposals Greece presented new reform proposals on Monday which its euro zone partners cautiously welcomed as a possible basis for an agreement to unlock bailout funds needed to avert a possible debt default. Financial Express, New Delhi, June 23 (Reuters) <http://www.financialexpress.com/article/economy/greece-debt-crisis-11-keypoints-in-alexis-tsiprass-cash-for-reform-proposals/88739> Greece presented new reform proposals on Monday which its euro zone partners cautiously welcomed as a possible basis for an agreement to unlock bailout funds needed to avert a possible debt default. Here is a summary of the proposal as spelled out by Greek government officials. 1) PENSIONS Early retirement to be curbed gradually from 2016 to 2025, but exemptions for some specific categories to be maintained, including for arduous professions and mothers with disabilities. A special benefit for some low-income pensioners, amounting to between 57 to 230 euros ($64.66 to $260.89) a month to remain but to be replaced from 2020 by new protection framework for low pensions. This is a key point of friction between Greece and its lenders, who wanted it scrapped. 2) VAT Greece to keep three value added tax rates of 23 percent, 13 percent and 6 percent. Electricity and restaurants to be taxed at 13 percent instead of being raised to 23 percent, as lenders had demanded, while medicines to be cut to 6 percent rather than raised to 11 percent as sought by lenders. Officials said lenders were asking for two rates of 11 percent and 23 percent. 3) TAX HIKE FOR HIGH EARNERS Solidarity tax for higher income earners (revenues above 50,000 euros ($56,710) to be increased, while lowering the tax for revenues below 30,000 euros. It introduces a solidarity tax of 8 percent on revenues above 500,000 euros. 4) CORPORATE, LUXURY TAX HIKES Tax plans to include: a) a special levy of 12 percent on businesses that post a profit of over 500,000 euros; b) Increases in luxury tax on pools, planes, big cars and private boats over 10 meters (33 feet); c) a tax on gambling slot machines (VLTs). 5) PRIVATISATIONS Privatisations to impose a minimum amount of investment, a commitment by investors to promote the local economy and a participation of public equity. The transfer of Greece’s state equity in Greek telecoms operator to the country’s privatisation agency will not be part of the lenders’ prior actions. Greece will not privatise its power grid operator (ADMIE) nor its dominant power utility PPC, as requested by creditors. 6) PUBLIC SECTOR WAGES No cuts to public sector wages from levels at end-2014. 7) SPENDING CUTS Cut defence spending by 200 million euros. 8) PRIMARY BUDGET SURPLUS Primary budget surplus of 1 percent in 2015 and 2 percent in 2016, compared with 3 percent and 4.5 percent agreed to by previous Greek governments. 9) BONDS Greece repeated demand for euro zone to lend it money to buy back 27 billion euros of its bonds from European Central Bank – effectively rolling-over the debt on more favourable terms. 10) INVESTMENT Greece wants deal to include financing of infrastructure and new technologies through an investment package from the European Commission and the European Investment Bank. 11) NUMERICAL TARGETS According to leaked proposals on Greek websites, Greece also planned to increase pension contributions to cash in 605 million euros this year and 1.56 billion euros next year. Spending cuts and tax revenues would produce budget measures equivalent to 2.69 billion euros or 1.51 percent of GDP this year and 5.2 billion euros or 2.87 percent of GDP in 2016, up from 1.99 billion or 1.1 percent of GDP and 3.58 billion euros or 2 percent of GDP previously. ($1 = 0.8817 euros) 4) Greeks set to face tax barrage Households and corporations are up against a bill of more than 13 billion euros by the end of the year by Prokopis Hatzinikolaou I Kathimerini, Athens, June 23 <http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_23/06/2015_551427> Greek taxpayers face a daunting raft of obligations this fall as, on top of the tough measures introduced in previous years, the government will add a new tax and social security burden totaling 2.69 billion euros. Consequently the year’s second half, and especially September, will be tough for both citizens and enterprises, as they will have to pay taxes amounting to 13.7 billion euros in a short period of time while their taxpaying capacity will be reduced. In September, Greek households will have to pay their second tranche of income tax and the single property tax (ENFIA) while coping with an increase in indirect taxation through value-added tax hikes and social security contributions. At the same time, the thousands who have entered schemes to pay off expired debts will also have to find the money to make their installments. Greek corporations face a similar situation, as well as having to pay increased social security contributions for their employees. Also, besides the tax on their earnings, firms with more than 500,000 euros of profits last year will have to pay a total of 945 million euros this year as an extraordinary levy. In addition they must plan to pay another 405 million euros next year as the latter part of the extraordinary levy. What is even worse for many companies is that it was just a few days ago that they completed and published their financial reports, and some had even distributed dividends, not knowing that they would be asked to pay additional taxes in the coming months. It is therefore obvious that no citizen or enterprise in Greece can plan ahead unless they simply take it for granted that each year they will have to factor in some extraordinary levy to the state’s benefit. Taxpayers with annual revenues of at least 30,000 euros will also have to shoulder an increase in the solidarity tax, to say nothing of the tax hikes for owners of cars of more than 2,500 cc, swimming pools, yachts more 10 meters long etc. 5) Mixed reaction at employer unions I Kathimerini, Athens, June 23 <http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_23/06/2015_551429> Employer representatives received the government’s proposals to its creditors with a mix of relief and concern, as while discerning an end to the uncertainty they also see the planned measures have a strong recessionary character and are calling on the government to opt for measures cutting state expenditure instead of excessive taxation plans. “The upcoming agreement is a particularly positive development. However, we are expecting the government to make different choices that will banish the recessionary threat from the national economy,” said the head of the industrialists’ federation (SEV), Theodoros Fessas. “This is a very bad deal which imposes a dramatic burden on the private sector,” stated Antonis Zairis, vice president of the association of retail enterprises (SELPE). He warned that in three or four years’ time the economic situation will be 10 times worse than today. “The eagerly anticipated agreement appears to be based on a modified recessionary program that will extend the period of the economy’s contraction and weaken the country’s production capacity,” argued the association of small manufacturers (GSEVEE). The union of tourism entrepreneurs (SETE) said it accepts the value-added tax rise from 6.5 to 13 percent on hotel accommodation, as long as VAT on food service stays at 13 percent. 6) Greece's new rescue plan is deeply flawed by Mark Thompson CNNMoney, London, June 23 <http://money.cnn.com/2015/06/23/news/economy/greece-europe-bad-deal/index.html> For many investors, it seems like any deal between Greece and its international creditors is better than no deal. Europe is hatching an agreement to release 7.2 billion euros ($8 billion) in bailout loans to Greece, without which the country will default to the International Monetary Fund next week, and possibly tumble out of the eurozone. Markets like the latest Greek proposal because it would deal with the immediate crisis, but it could store up trouble for the future. Here are three big problems with the plan: 1. The wrong kind of savings Left-wing Prime Minister Alexis Tsipras was elected in January on a promise to end years of austerity that contributed to a 25% slump in the Greek economy. The reality of an accelerating bank run, and the prospect of a chaotic exit from the euro, have forced Tsipras to backpedal, but the budget savings he is now proposing risk prolonging the recession that Greece has sunk back into this year. Experts say there's too much emphasis on raising taxes and pension contributions, and not enough on cutting spending or making the economy more flexible. Berenberg chief economist Holger Schmieding said Greece risked repeating the mistakes of its first bailout program, by hitting demand in the economy too hard. 2. No debt relief Greece has the second highest debt mountain in the world based on the size of its economy. Until recently Tsipras, and his combative finance minister Yanis Varoufakis, were insisting that relieving that burden had to be part of the agreement under discussion. Senior European officials -- mindful that their own taxpayers won't accept a haircut on the money they've loaned Greece -- killed any talk of that Monday after a summit of eurozone leaders. But economists say Greece won't grow fast enough, or generate big enough budget surpluses, to service its enormous debt any time soon -- even given the extremely low interest rates and deferred payment schedules attached to the international bailout loans. "We disagree with the proposal's suggestion that the intended measures will lead to a return to debt sustainability for Greece within 10 years," commented analysts at UBS Wealth Management. 3. It won't last long Assuming Tsipras can force the deal through the Greek parliament, and that key creditors such as the IMF and Germany accept it too, it will do little more than buy time for negotiations on yet another rescue. The final tranche of cash from the existing bailout should be enough to meet repayments due to the IMF and European Central Bank through the end of August. But the Greek government will then have to find more than two billion euros for both institutions in September and October. "If this week concludes with agreement between Greece and its creditors, it won't be long before the next chapter in this drama," said Angus Campbell, senior analyst at FxPro. UBS estimates Greece may need additional funds of nearly 14 billion euros to carry it through to the end of 2015. "Greece therefore needs a new funding program, a debt restructuring or a combination of the two," wrote analysts at the Swiss bank. _________________________________________________________ Full posting guidelines at: http://www.marxmail.org/sub.htm Set your options at: http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com
