Tags: Greece | greece | euro | eu | creditors | reforms | austerity

Greece Rushing to Finalize Tough Reforms Plan and Remain in Euro

Greece Rushing to Finalize Tough Reforms Plan and Remain in Euro
Greek Prime Minister Alexis Tsipras. (Milos Bicanski/Getty Images)

By    |   Thursday, 09 July 2015 06:54 AM

Greek Prime Minister Alexis Tsipras raced on Thursday to finalize a tough package with tax hikes and pension reforms due within hours if Athens is to win a new aid lifeline from creditors and avoid crashing out of the euro.

Tsipras was huddled with advisers, pulling together a package of reforms that is expected to include much tougher measures than those included in a previous plan from creditors that was rejected by Greeks in a referendum on Sunday.

But having won wide public support at the referendum and the subsequent backing of opposition parties, an emboldened Tsipras is expected to have an easier time facing down any resistance at home, allowing him to focus to appeasing creditors, Reuters reported.

The last-minute negotiations come amid bank closures in Greece, where capital controls have been imposed that restrict Greeks to cash withdrawals of 60 euros ($67) per day.

The closures have been extended through Monday.

Pensioners without bank cards have been particularly hard hit as they have struggled to access their accounts. Certain bank branches opened last week to allow them to withdraw a weekly allowance of 120 euros each, and the government announced Wednesday that this was being renewed. Hundreds of elderly Greeks lined up outside banks Thursday morning.

Thursday is "a decisive day" for Europe, EU Economics Commissioner Pierre Moscovici said on France-Inter radio, adding he was hopeful a new Greek bailout deal was possible, in exchange for "concrete, complete" reform proposals.

"I have the sense that the dialogue is established, or restored, and that there is a way out," Moscovici said, The Associated Press reported. Failure to reach a deal could be the first step toward Greece leaving the shared euro currency.

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 euro.

"I believe he will have to get an agreement. We will pay dearly for it, but at least we'll get an agreement," mechanic Pantelis Niarchos, walking down the street in central Athens, told the AP.

The Greek daily Kathimerini said the package was worth 12 billion euros, bigger than a previous 8 billion euro plan because the economy — battered by two weeks of capital controls — was now expected to shrink 3 percent instead of growing 0.5 percent this year.

A government official, speaking on condition of anonymity, disputed the Kathimerini figure, saying the package was still a work in progress, Re.

The offer must go far enough to satisfy skeptical creditors but may face resistance from the hard-left wing of Tsipras' Syriza party and from his junior coalition partner, the Independent Greeks, after the government campaigned and won a resounding 'No' to more austerity in a referendum on July 5.

In a sign of the some of the upcoming challenges Tsipras will face, the leader of the far-left flank of his Syriza party came out to denounce any imposition of harsh measures on Greeks.

"We don't want add to the past two failed bailouts a third bailout of tough austerity which will not give any prospects for the country," Energy Minister Panagiotis Lafazanis told reporters. "Greece is not facing execution, it is not ready to accept any fait accompli."

But Lafazanis also said it was clear Greece was looking to reach a deal soon with the institutions that will respect the "dignity" of people, leaving the door open for him to eventually back an agreement struck with creditors.

Greece's European partners want the reforms proposal on the table by Friday and Athens has promised to produce it on Thursday at the latest. If satisfied, the European leaders would endorse the package on Sunday, averting a potential Greek exit from Europe's single currency.

Greece emerged last year from a deep recession that shrank its gross domestic product by a quarter over a six-year period, leaving a quarter of the workforce unemployed.

Government sources told Reuters that proposed tax hikes would include an increase in corporate tax to 28 percent from 26 percent; a rise in VAT on luxury goods to 13 from 10 percent; a rise in VAT on processed foods, restaurants, transport and some health services offered by the private sector to 23 percent from 13 percent; and a VAT hike on hotels to 13 percent from 6.5 percent.

Greek islands would continue to enjoy tax breaks that creditors had sought to scrap, Reuters said.

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Greek Prime Minister Alexis Tsipras raced on Thursday to finalise a tough package of across-the-board tax hikes and pension reforms due within hours if Athens is to win a new aid lifeline from creditors and avoid crashing out of the euro.
greece, euro, eu, creditors, reforms, austerity
Thursday, 09 July 2015 06:54 AM
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