Greece spells out terms for debt crisis 'breakthrough'

  • 22 June 2015
  • From the section Europe
Media captionGreece's economy minister Giorgos Stathakis told the BBC's Robert Peston that creditors accepted Greece's debt plan

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.

Eurozone finance ministers have welcomed the plan, saying there could be a deal "within days".

Greece is required to repay a €1.6bn (£1.1bn) International Monetary Fund (IMF) loan by the end of the month.

If it does not, it risks crashing out of the single currency and possibly the EU.

Media captionChristian Fraser reports from Athens: ''More Greek flags than euro flags'' outside the parliament building

Eurozone leaders met on Monday evening to discuss Greece's proposals at an emergency summit in Brussels.

Mr Stathakis earlier 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.

Analysis - Robert Peston, BBC economics editor

Greece's economy minister Giorgios Stathakis told me that his Syriza government, led by Alexis Tsipras, had avoided crossing its red lines with the new proposals.

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.

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.

Read more from Robert

Meanwhile, dozens of riot police were deployed to prevent clashes between anti-austerity and pro-euro protesters gathered outside the Greek parliament building on Monday.

Speaking ahead of Monday's summit, European Council President Donald Tusk said the latest Greek proposals were the "first real proposals in many weeks".

"This evening I want all cards on the table. That doesn't mean I want to negotiate technical details, but it means I want to end this political gambling," he said.

French President Francois Hollande, who also attended the summit, said he saw improvements with the proposals but warned "not everything has been resolved".

Talks have been in deadlock for five months. The European Commission, the IMF and the European Central Bank (ECB) are unwilling to unlock the final €7.2bn tranche of bailout funds until Greece agrees to economic reforms.

Image copyright AFP
Image caption Leaders of Greece's creditors - the ECB, IMF, European Commission and European Council - met to discuss strategy before Monday's summit
Image copyright Mark Georgiou
Image caption Riot police were deployed in Athens as people take to the streets over the debt crisis

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".

He met the heads of Greece's three international creditors in Brussels, ahead of his talks with the leaders of 18 other eurozone nations later on Monday.

'Broad and comprehensive'

But eurozone finance ministers said they were not given enough time to study them for a proper assessment, amid confusion over different versions of the Greek proposals submitted.

Speaking after the meeting, Mr Dijsselbloem described the proposals as "broad and comprehensive", but said work was needed to check they added up "in fiscal terms".

One of the key power-brokers, European Commission chief Jean-Claude Juncker, told reporters his goal was to find an agreement "by the end of the week".

Media captionA taxi driver in Athens told the BBC's Christian Fraser: ''The economy is down''

Earlier, Germany's Wolfgang Schaeuble told reporters he had not seen anything new from Greece so far and "without anything new, there is nothing for the ministers to prepare for their leaders". The Irish and Finnish finance ministers echoed the sentiment.

News of a possible breakthrough gave a boost to European stock markets, with Greece's main stock exchange jumping 9% by the end of trading on Monday.

The deadline for Greece to pay back a slice of its loan is 30 June, but a last-minute deal would make it difficult to arrange the logistics of transferring the money.

A separate European Council summit is scheduled for Thursday and Friday, and its agenda is packed.

Image copyright Getty Images

Greek debt talks: Main sticking points

  • Greece will not accept cuts to pension payments or public sector wages, saying two-thirds of pensioners are either below or near the poverty line
  • International creditors want pension spending cut by 1% of GDP - it accounts for 16% of Greek GDP. They say they want to target early retirement, not lower-income pensioners
  • EU officials say Greece has agreed to budget surplus targets of 1% of GDP this year, followed by 2% in 2016 and 3.5% by 2018; Greece says nothing is agreed until everything is agreed
  • Creditors also want a wider VAT base; Greece says it will not allow extra VAT on medicines or electricity bills
  • Greece complains creditors focus on increasing taxes instead of cracking down on tax evasion; IMF is concerned Athens is not offering credible reforms

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