Brussels---Greece has submitted a new debt plan aimed at resolving the row between Athens and its European and IMF creditors, addressing key sticking points that have blighted months of talks.
Greece's proposals -- which were examined in Brussels at an emergency summit of eurozone leaders on Monday -- are focused on VAT rates, early retirement measures and tax hikes, and narrowing the country's budgetary gap.
BALANCING THE BUDGET
The state of Greece's budget no longer appears to be the major stumbling block that it once was.
The new proposals from Athens seek to close a gap of almost one billion euros between the creditors' demands for savings in the 2016 budget and the last offer Greece's leftist government made, which was rejected.
Anti-austerity Athens has conceded ground on pensions and defence spending but movement on VAT is still wanted by creditors.
The European Union and International Monetary Fund want Athens to run a current account surplus for several years, arguing that it is running a deficit again -- spending more money than it receives in taxation revenues.
The key method of measuring this is the primary balance -- which is the difference between revenue and public expenditure, excluding payments of interest on debt.
The EU and IMF are now asking only for a primary surplus target this year of one percent of annual gross domestic product (GDP), followed by two percent in 2016 and three percent in 2017.
However, with Greece's economy in free fall, hitting those targets would require an immediate budget saving of at least three billion euros ($3.4 billion) and potentially more. That is unthinkable unless the economy grows strongly for a sustained period of time.
Athens wants a much lower surplus target of 0.6 percent this year that would require no extra saving, but has now budged, signalling it would accept 0.75 percent and even higher.
VAT
Creditors remain dissatisfied at Athens' plans for value added taxation which is levied on goods and services. They are still at loggerheads over the size of the increase and which sectors it will affect.
Greece is counting on a big VAT hike to hit its budget targets, and in the new proposals it has outlined further adjustments to VAT that could bring some two billion euros in additional revenue to state coffers, media reports said.
Athens would be prepared to raise the VAT on hotel stays from 6.5 percent to 13 percent, but the key issue of lifting the rate on restaurants from 13 percent to 23 percent has not yet been resolved.
At the same time Greece has maintained the 13-percent VAT rate on electricity, a "red line" for the anti-austerity government which has resisted creditors' demands to ramp this up to 23 percent, citing serious social implications.
AFP
