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Greece’s Creditors Make Some Concessions as Showdown Approaches
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In Suzy Hansen's interview with Greece finance minister Varoufakis in the NYT, May 20, 2015, Varoufakis says his worst fear is that the EU will insist on the 4.5% surplus. He says he cannot budge on pensions because of the way the elderly have suffered, and on collective bargaining rights for workers. The EU proposal made by Hollande and Merkel after stalled negotiations shows the EU conceding on the surplus and collective bargaining, but asking for some cuts in pensions. Dendrinou and Stamouli provide some details of the proposal of Hollande and Merkel for Greece that is emerging after stalled negotiations. The proposal sets targets for primary surpluses- revenues minus expenditures before interest payments- of 1% in 2015, 2% in 2016, 3% in 2017, and 3.5% in 2018. Under the existing program for Greece the targets for surpluses were 3% in 2015 and 4.5% after 2016. The reduction is 2 percentage points for 2015 and 2.5 percentage points in 2016 for the primary surplus from the prior program. Greece's pensions system will have to come up with savings of 0.25%-0.5% of GDP in 2015, and 1% of GDP in 2016. Another major concession by the EU is no reduction in the number of public sector workers in exchange for the Greek government's commitment not to reverse previous measures taken to open up labor markets by prior governments. In place of immediate measures to make firing workers easier, further consultation with the EU will take place. Greece will be asked to simplify its VAT system to 2 rates of 11% and 23% which would generate higher revenues. Greece had asked for 3 rates, which EU officals say did not come up with the extra 1.8 billion euros, or about 1% of GDP.
The EU proposal on Greece made by Hollande and Merkel on June 2, 2015
06/03/2015
The June 2015 proposals provide EU concessions on public sector worker reduction, and the surplus targets for 2015-2017, in an effort to reach a settlement. French president Hollande and German chancellor Merkel worked together to come up with a deal for Greece. Greece will have to make some cuts in the middle of a deep downturn, and continue reforms, but the plan takes into account the current situation by setting lower surplus targets and giving Greece more time to correct its finances.
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Linked Articles
Greece’s Creditors Make Some Concessions as Showdown Approaches
Wall Street Journal 06/03/2015
Economist 06/20/2015
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