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*cover letter on new proposals from Tsipras to EC Commissioner Juncker June 22* <https://twitter.com/claudiperez/status/613051340458184704> 1) Greece offers new proposals to avert default, creditors see hope by Renee Maltezou and Jan Strupczewski Reuters, June 22 <http://www.reuters.com/article/2015/06/22/eurozone-greece-idUSL8N0Z811320150622> BRUSSELS - Greece took a step back from the abyss on Monday with the presentation of new budget proposals that euro zone leaders welcomed as a basis for a possible agreement in the coming days to unlock frozen aid and avert a looming default. European Council President Donald Tusk, who chaired an emergency summit of leaders of the 19-nation currency bloc, called the Greek proposals "a positive step forward". He said the aim was to have the Eurogroup finance ministers approve a cash-for-reform package on Wednesday evening and put it to euro zone leaders for final endorsement on Thursday morning. However, there must first be a detailed agreement with representatives of European governments, the European Central Bank and the International Monetary Fund to ensure the numbers add up, he said. . . . The Greek proposals included higher taxes and welfare charges and steps to curtail early retirement, but not the nominal pension and wage cuts first sought by lenders. Leftist Prime Minister Alexis Tsipras, elected in January on a promise to end austerity measures, also appeared to have avoided raising value added tax on electricity or loosening job protection laws. Tsipras said the ball was back in the creditors' court and they should provide a deal that would make Greece's huge debts affordable. "We are seeking a comprehensive and viable solution that will be followed by a strong growth package and at the same time render the Greek economy viable," he told reporters. The cash-starved country must repay the IMF 1.6 billion euros by June 30 or be declared in default, potentially triggering a bank run and capital controls. Jeroen Dijsselbloem, chairman of the euro zone finance ministers, known as the Eurogroup, described the new Greek document as comprehensive and "a basis to really restart the talks". He said negotiations in the coming days would show whether the numbers added up. He left the summit saying only that there would be "hard work for the next few hours". German Finance Minister Wolfgang Schaeuble was the most negative, telling reporters earlier in the day he had seen nothing really new from Greece. Participants said Schaeuble questioned in the Eurogroup meeting whether the European Central Bank should continue emergency lending to Greek banks if there was no deal this week and whether it should not be accompanied by capital controls. A Greek official said ECB chief Mario Draghi had reassured Tsipras in a private meeting that the central bank would continue to support Greek banks as long as Athens remained in a bailout programme. An ECB source said there was no direct link between the emergency liquidity assistance and the programme. Participants said IMF chief Christine Lagarde cast doubt in the meeting on whether the proposals were sufficient to make Greece's public finances sustainable. "We have a huge amount of work to do in the next 48 hours. We are not at all at the end of the route," Lagarde said on leaving the summit. Tsipras had demanded a promise of debt relief as a condition for a deal, but both Merkel and Juncker said now was not the time to discuss it. An EU diplomat said Tsipras struck a very cooperative tone in the summit and promised to work further on the proposals to ensure a deal this week. Juncker said he had proposed a 35 billion euro programme for growth-enhancing measures in Greece up to 2020. The money appeared to be a restatement of existing EU budget funds earmarked for Athens. . . . With anxious Greek savers continuing to withdraw cash, though apparently in smaller amounts on Monday than last week, the ECB increased its emergency lending to Greek banks for the third time in a week. But after months of acrimony, the positive mood music in Brussels gave investors hope that an agreement might be near. European shares hit their highest level in a week and the Greek stock market jumped 9 percent while the borrowing costs of Italy, Spain and Portugal - the countries most likely to be hit if Greece headed for the euro zone exit - fell sharply. . . . In its proposal, Greece offered to raise the retirement age gradually to 67 and curb early retirement. It also offered to reform the value-added-tax system to set the main rate at 23 percent, and promised additional taxes on business and the wealthy. Economics Minister George Stathakis told the BBC that Athens had avoided crossing "red lines" set by Syriza, since it would not cut pensions or wages or raise the VAT rate on electricity. . . . Several thousand pro-European Greeks staged a demonstration in favour of staying in the euro on Monday in central Athens, a day after thousands of leftists had rallied to protest against a new round of cuts. 2) Greece spells out terms for debt crisis 'breakthrough' by Robert Peston BBC News, June 22 <http://www.bbc.com/news/world-europe-33228119> Greece's economy minister has spelled out the terms of new proposals to end deadlock on its debt crisis, amid hopes a deal can now be struck this week. It includes new taxes on businesses and the wealthy, Giorgios Stathakis told the BBC in an exclusive interview. . . . Mr Stathakis told the BBC's Robert Peston he was confident the new proposals to balance the government's books had broken the deadlock with its creditors. "We [will] try to remove the tax burden from pensions and wages towards business and the wealthy," he said. He said the proposals also included an increase in the VAT rate for some selected items. . . . There will be no agreement with creditors to cut Greece's massive burden of debt, despite Syriza's earlier insistence on this. But Mr Stathakis told me he expects eurozone government heads to issue a communique later saying that debt relief will be on the agenda for negotiation in coming months. Meanwhile, dozens of riot police have been deployed to prevent clashes between anti-austerity and pro-euro protesters gathered outside the Greek parliament building. . . . The European Central Bank (ECB) has again increased its emergency funding for Greek banks after anxious savers withdrew more than €4bn in recent days. Greek PM Alexis Tsipras, who has ruled out pension cuts, higher power rates, and an excessive budget surplus, said he hoped Greece would "return to growth within the eurozone". . . . 3) Hopes for Greece bailout deal rise sharply as Athens gives ground Creditors view new Greek proposals on pensions and VAT as the most positive move yet in five months of wrangling by Larry Elliott , Ian Traynor in Brussels, Helena Smith in Athens, and Phillip Inman The Guardian, June 22 <http://www.theguardian.com/business/2015/jun/22/hopes-greece-bailout-deal-rise-sharply> Hopes of a deal that would spare Greece from a looming debt default and possible exit from the single currency rose sharply on Monday after the country’s European partners welcomed proposals from Athens to cut its pension bill and raise extra money from VAT. In what was seen in Brussels as the most positive development since negotiations began five months ago, the leftwing government of prime minister Alexis Tsipras showed a willingness to give ground on the two issues that have left it at odds with its creditors. . . . The Greek government insisted that none of its red lines had been crossed but finance ministers from eurozone countries believe Athens has now made significant concessions by agreeing to raise an additional €2.7bn (£1.9bn) in revenues this year. Brussels called the plan “detailed, credible and impressive”, and viewed it as the basis for an agreement that would involve further bailout funds released to Greece. “It’s the first big positive sign from the Greeks,” said one official. “It’s the most comprehensive proposal they have made.” Jeroen Dijsselbloem, the Dutch finance minister, who chairs the group of 19 eurozone countries, said the Greek plan was “a basis to really restart the talks again and really get a result”. In a letter accompanying the economic plan, Tsipras said that “the requirements of the [creditor] institutions for covering the fiscal gaps for 2015-16” would be met absolutely and completely. . . . In its 11-page proposal, Greece accepted that its pension system needed to be reformed, and said it would save money by increasing pension contributions, health payments by retirees and a new tax on businesses. But pension rates would be left untouched, allowing Tsipras to say that he has not crossed his red lines. Greece said higher VAT would net an additional €1.3bn in 2016. Germany’s finance minister Wolfgang Schäuble led demands by some Eurogroup finance ministers at Monday’s meeting for capital controls in Greece – a curb on bank withdrawals – that would limit the exposure of European taxpayers to a possible default. Rearguard action from Berlin and the IMF – both of which are thought to have reservations about the Greek blueprint – could yet hold up or derail an agreement that would unlock the bailout funds that would let Athens to make a €1.6bn payment to the IMF at the end of the month. But if finance ministers give their approval, a final deal would be signed by European leaders when they meet for a two-day summit in Brussels on Thursday. Jean-Claude Juncker, the commission’s president: “My aim is a deal by the end of the week. We are working day and night for this.” Finance ministers from the Eurogroup of countries will meet again on Wednesday to assess whether their demands have been met. . . . In Athens, government officials said Tsipras would continue to press for a solution that was both comprehensive and viable. Speculation that a six- to nine-month extension was now in the offing was dismissed as ultimately unworkable. “For it to be durable it has to be of long duration and it has to tackle the issue of our country’s unsustainable debt,” one official said. “We are hoping that all this talk of prolonging the current [bailout] accord is just part of the other side’s negotiating tactics.” The political opposition also warned against the perils of a short-term agreement on Monday – even if they also said an agreement was better than the alternative of no agreement and eurozone exit. Leading figures in the world of industry and commerce – which, like the rest of the economy, has been brought to a standstill by five months of fruitless talks said merely prolonging the current bailout programme might ultimately prove devastating. An estimated 8,500 small and medium-sized businesses have closed since the start of the year. For the second time in days, thousands of Greeks poured into Syntagma square in central Athens on Monday night to exhort the Tsipras government not to endanger Greece’s place in the eurozone and by extension the EU. Unfurling a giant blue and white flag over the retaining wall of the Greek parliament, they chanted “Europe, Europe, we are staying in Europe.” “Tsipras has to know that he got into power with 36% of the vote, he is not there with the support of all Greeks and he has absolutely no right whatsoever to take us out of Europe,” said Marietta Kontou, a shopowner, insisting it was outrageous that the leftist-led government had opened Greece’s membership of the euro to question at all. “Europe is where this country belongs. It is very important that we belong to the west.” Any deal between Greece and its creditors must start with a budget surplus target. That is the difference between tax income and government spending, expressed as a proportion of Greek GDP. The more surplus money that is generated every year by tax income, the more can be used to pay down the €240bn (£172bn) that Athens owes its troika of creditors. Alexis Tsipras is offering to achieve a 1% surplus this year, 2% next year, and 3% in 2017. It is a tall order for a country that has lost a quarter of its national income since the financial crash, has to cope with an unemployment rate of 26% and is owed €76bn in unpaid taxes. Those creditors – the ECB, IMF and European the commission – believed Tsipras was offering insufficient cuts to meet the 1% target. The difference between both sides was worth a modest-seeming €2bn in government expenditure. The proposals lodged on Monday by Tsipras and his team after a hectic weekend of negotiations were an attempt to bridge that gap and centre on two key areas: pensions and tax. The plan includes a restriction on early-retirement options from this year, saving €60m this year and €30m next year. The measure will accelerate a clampdown that was previously going to be phased in over several years. An increase in pension contributions will raise €350m this year and €800m next year, while a higher health contribution from retirees will raise €135m this year and €510m in 2016. A rise in VAT will generate €380m this year and €1.3bn in 2016. Income tax rates remain intact, but a solidarity supplement on top of the main rate that was brought in after the crash is to rise, raising €220m this year. Corporations are to be clobbered with a surcharge of 12% on profits above €500,000. Corporation tax also rises to 29% next year from 26%, raising €410m. 4) The latest reports about the new Greek proposals According to international media reports, the new Greek proposals in the EU summit contain pension savings, VAT increases and new taxes on businesses & wealth. Times of Change, Greece, June 22 <http://www.thetoc.gr/eng/news/article/the-latest-reports-about-the-new-greek-proposals> According to the New York Times, in the latest proposal, the Greek government offered a concession around pensions, which have been a major sticking point in negotiations. Many economists consider the pension system unsustainably lavish for a country that has spent much of the past five years in recession and where a quarter of the working-age population is unemployed. Under the new proposal, Athens is aiming to find pension savings equal to about 1.4 percent of the country’s gross domestic product by the end of 2016 — exceeding creditors’ demands. To do so, the government is aiming to increase employer and worker contributions as opposed to cutting pensions outright, according to a person with knowledge of the Greek proposal who spoke only on the condition of anonymity. Meanwhile, earlier, Economy Minister Giorgos Stathakis was interviewed by the BBC. He detailed Greece's new money-raising proposals. These include a new tax on businesses, a new tax on the wealthy and some increases in the VAT rate on selected items. But he said that his SYRIZA government, led by Alexis Tsipras, had avoided crossing its red lines. So, he said, there would be no further reductions in pensions or public-sector wages. And there would be no increase in VAT on electricity. He also said that the government had agreed with the IMF and eurozone governments that the targeted budget surplus would be 1% of GDP or national income this year, 2% next year and 3% the year after. Joost de Vries of Dutch newspaper Volkskrant has tweeted a page showing where the cuts and tax rises fall. And there’s a hefty increase in revenues from VAT over the next 18 months. Greece has also accepted that pension must be reformed, and is planning a hike in pension contributions and an increase in health contributions from retirees. However, it appears that actual pension rates won’t be cut, allowing Athens to argue it has kept to its red line. There’s also a one-off tax on company profits, for firms earning at least half a million euros. In a series of tweets, the Financial Times' Peter Spiegel wrote that "measures offered by Greece estimated by Athens to total €2.69bn in 2015 and €5.2bn in 2016, according to people who have seen proposal", adding that thwe "biggest change in pension proposal is an increase in contribution to main pensions of 3.9%. Estimated to raise €800m in 2016". 5) With an Assist From Putin, Greece — for Now — Wins The prospect of Russian President Vladimir Putin rescuing Greece might be enough to get Europe to cave to Athen's debt demands. by David Francis Foreign Policy magazine, June 22, 2015 <https://foreignpolicy.com/2015/06/22/with-an-assist-from-putin-greece-for-now-wins> For months, Greece and the European Union have squared off over austerity in Athens... . . . On Monday...Europe blinked. Greek Finance Minister Giorgios Stathakis submitted a reform plan Monday that included new taxes on Greece’s businesses and wealthy citizens, but does not change the Greek retirement system. Now, as European leaders hold an emergency meeting to discuss the standoff, a deal for Greece to pay part of what it owes — the total bailout to the cash-strapped nation is $270 billion — is expected within the week. According to Mujtaba Rahman, head of the Eurasia Group’s European practice, the Greek prime minister’s flirtation with Putin was enough to break Europe’s collective will. As Tsipras met with Putin last week in St. Petersburg, Russian officials said they would consider giving Greece emergency aid. Greek and Russian officials also announced a natural gas deal last week, and in the past, Putin has promised to invest in infrastructure there. This developing relationship is something German Chancellor Angela Merkel has good reason to fear. She needs European and NATO unity to continue sanctioning Russia for its actions in Ukraine. In the past, Tsipras has accused Europe and the United States of trying to start a new cold war. However, the basis for Russian-Greek cooperation — the Turkish Stream pipeline — may end up being a pipe dream. Construction on the gas line has yet to begin, and a previous pipeline, called South Stream, was canceled in 2014 because it ran afoul of European regulations. “I would be very skeptical that this plan is going to work,” Vessela Tcherneva, an energy expert and director of the Wider Europe program at the European Council on Foreign Relations, told Foreign Policy on Friday. “I would put it in the category of Greece needing to show it has alternatives, and Russia wanting to demonstrate its ability to divide the EU.” Monday’s events mark a stunning turnaround from last week, when the European Central Bank had to lend Greek banks money to stop a run on banks there. Then, it appeared as if Europe was content to let the Greeks default, an event that could lead to to so-called Grexit: Greece getting kicked out of the European monetary club. Now, Greece will likely live to see another day in the eurozone. And Tsipras’s strategy to keep Europe’s hands out of Greek retirement funds worked. While Greece is likely to remain in the monetary union, the crisis is far from over. Rahman predicted that a deal between Greece and Europe would keep the IMF from panicking, if Athens can’t turn over the cash it owes by the end of the month. But, at some point, Greece will have to pay its debt. It also has to crack down on Greek taxpayers, who are notorious for dodging government levies. But for now, it appears as if Tsipras got what he wanted: a political deal with Europe that keeps Brussels out of Greek retirement funds. “They’ve absolutely won. This is a massive victory,” Rahman told FP Monday. _________________________________________________________ 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
