Brussels, 15/06/2015 (Agence Europe) - On Monday 15 June, Greece and the European Commission seemed to find it difficult to get over the breakdown at the weekend in the talks to get out of the deadlock on the question of reforms that Greece has to implement to obtain the remaining money from the second bailout programme. The Commission surprised everyone by giving official comments for the first time on the substance of the talks.
The President of the European Commission, Jean-Claude Juncker, “is disappointed that, despite great efforts to facilitate progress, progress is not evident. The European Commission is ready to engage if there is something new,” said Commission spokesperson Margaritis Schinas.
“We have largely exhausted our limits,” Greek spokesman Gabriel Sakellaridis said in Athens. The day before, Greek prime minister Alexis Tsipras, described the demands of the three institutions (European Commission, ECB and IMF) as irrational. “We will wait patiently for the institutions to move toward realism,” said Tsipras.
As if to let people judge for themselves, on Monday, the European Commission gave details of the institutions' common proposals. Commission spokesperson Annika Breidthardt gave an “on the record statement to avoid misunderstandings.” The spokesperson said the first point was “a sizable, credible, fiscal adjustment: 1% in 2015, 2% in 2016, 3.5% in 2018,” as opposed to the earlier targets of a primary surplus of 3% in 2015 and 4.5% in 2016 and beyond. The new proposed targets are lower than they should be taking economic circumstances into account in line with the February Eurogroup agreement, explained Breidthardt. The Greek authorities are reported to have agreed to these targets, as revealed in a Greek document sent to the institutions on Saturday and put online on Monday by Greek newspaper Kathimerini, but there are disagreements over how to achieve this. French newspaper Le Monde says there is a €2 billion gap between the institutions' calculations and the Greek government's calculations when it comes to the budget gap for 2016, which the government says would be 1.1% of GDP.
Olivier Blanchard of the IMF warned in an article published in an IMF blog on Sunday that the reduced targets meant greater official foreign financing requirements and a commitment to a large-scale writedown of Greece's debt by the European lenders.
The European Commission has denied calling for cuts in individuals' pensions. Breidthardt said that the Greek pension system is among the most expensive in Europe. She said: “The reform is about phasing out early retirement, about prolonging the pension age, about removing incorrect incentives for early retirement and ... about making the Greek pension system financially sustainable in the long run.” The institutions have set a savings target for the pensions system of 1% of GDP annually, but the Greeks have offered to make €71 million of savings in 2016, less than 0.04% of GDP, explained Breidthardt. The Commission also denied wanting pay cuts, explaining that pay should rise in line with productivity and the economy's competitiveness needs. The institutions want collective agreements and VAT collection to be “modernised.”
The Greek document proposes three different rates of VAT in order to net €1.4 billion, namely 6%, 13% and 23%. VAT on electricity would remain at 13%, rather than being increased to 23% as wanted by the institutions. The Commission says it is prepared to discuss the matter.
The president of the ECB, Mario Draghi, told MEPs on the EP's economic and monetary affairs committee that the ECB would continue to support Greek banks as long as they are solvent and have sufficient collateral. “For the Governing Council to reconsider the T-Bills ceiling, there should be a credible perspective for a successful conclusion of the current review and subsequent implementation which would imply the disbursement of programme funds by euro area member states.”
On 30 June, Greece has to repay €1.6 billion to the IMF, but nobody knows how it will be able to do so. On Monday, MEP Alain Lamassoure (EPP, France) said that going bankrupt did not mean leaving the eurozone and technically speaking, there was nothing that forces a country that cannot honour its debts to leave the eurozone. European Commissioner Günter Oettinger, a German national, set the cat among the pigeons on Monday evening by saying: “We should work out an emergency plan because Greece would fall into a state of emergency.”
Greek finance minister Yanis Varoufakis said that in his view, agreement was possible overnight if the German chancellor took part in the talks. (Elodie Lamer with Mathieu Bion)