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Greece Offers Long-Sought Reforms To European Leaders

  • RFE/RL

Greece finally on July 9 proposed sweeping reforms of its tax and pension systems long sought by European leaders, setting off a mad rush to put together a weekend deal that safeguards the nation from financial collapse.

The plan in many ways mirrored longstanding European Union proposals to raise sales taxes, nudge up the average retirement age, and make other reforms that the left-leaning Greek government had long resisted.

With such far-reaching reforms, the package raised hopes that Greece can get the debt relief and rescue deal needed from the EU to prevent an impending financial implosion.

With "realistic" reform proposals in hand, European leaders said they were ready to discuss how to ease the country's huge debt load, a long-time sticking point in their talks.

Among its major reversals, the Greek plan accepts European demands to reform the pension system so that it discourages people from retiring at an average age of around 60 and encourages people to work until 67 -- a standard retirement age elsewhere in the world.

Greece also for the first time conceded to demands it had previously rejected to accept higher value added tax rates on restaurants, hotels, and other services. A large part of the higher taxes likely would be paid by tourists visiting Greek islands. The most popular destinations would lose a current exemption from taxes.

The plan would also raise taxes on shipping companies and privatize the state telecom company and ports of Piraeus and Thessaloniki.

After months of foot-dragging, Greek Prime Minister Alexis Tsipras even took the uncharacteristic step of meeting a midnight deadline to submit the plan July 9, with more than an hour to spare.

In exchange for the substantial reforms, which must be approved by Greek's parliament in a vote July 10, Greece is asking for billions of euros in debt relief and an additional 53.5 billion euros in loans.

After a vetting by the eurozone's finance ministers, a summit of the EU's 28 members is scheduled July 12 to vote on the plan -- with approval now looking like a distinct possibility.

The plan angered left-wing members of Tsipras' Syriza party, who likely will not vote for it. But lawmakers said there is enough support from more conservative opposition parties to ensure approval of the package, especially if it makes it possible for Greece to stay in the eurozone.

With an acceptable reform plan in hand, EU President Donald Tusk has said that the burden will be on European officials to address Greece's pleas for debt relief.

Nearly all sides agree that Greece will never be able to pay off its more than $300 billion in debts as scheduled. It already has missed one payment to the International Monetary Fund.

"The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors," Tusk said. "Only then will we have a win-win situation."

German Finance Minister Wolfgang Schaeuble, who has been the most outspoken opponent of debt relief, July 9 said the possibility of some kind of debt relief would be discussed over coming days, though he cautioned it may not provide much help.

"The room for maneuver through debt reprofiling or restructuring is very small," he said. Schaeuble insists that the EU's charter does not allow a straight write-off of debt, so Greece can only expect to get lower interest rates and a longer repayment schedule.

The last-minute concessions by Tsipras come as Greece's financial system teeters on the brink of collapse. The nation's banks have been closed for two weeks to prevent a run on deposits, and cash withdrawals have been limited to 60 euros a day.

With the European Central Bank providing only limited funds to keep Greek banks afloat, many ATMs have run out of 20 euro notes, effectively reducing the daily withdrawal limit to 50 euros.

If Tsipras does not get a deal, Greece faces an almost inevitable collapse of the banking system, which would be the first step for the country to fall out of the eurozone.

The growing shortages of cash and some necessities like medicine appears to have made the Greek public more willing to accept another round of reforms, despite a referendum vote solidly rejecting European austerity terms just last week.

Many people also have grown anxious about getting kicked out of the eurozone. Thousands of people rallied in downtown Athens July 9, demanding that the Greek government secure a deal that enables Greece to keep using the euro currency.

"I believe he will have to get an agreement. We will pay dearly for it, but at least we'll get an agreement," said Pantelis Niarchos, a mechanic in Athens.

With reporting by AP, Reuters, dpa, and AFP