Brussels, 24/06/2015 (Agence Europe) - Brief discussions at Eurogroup between Greece and its institutional lenders had not reached the desired aim by early evening on Wednesday 24 June, viz. an agreement on reforms that Greece will apply under its financial bailout plan in order to allow disbursement of aid at the end of the month to avoid default and a possible exit from the eurozone.
“Eurogroup was informed about the state of play in the talks between the institutions and the Greek authorities,” explained the head of Eurogroup, Jeroen Dijsselbloem, following the meeting of eurozone finance ministers, the third in less than a week. He said he was determined to pull out the stops to find a solution. Economic and Monetary Affairs Commissioner Pierre Moscovici said agreement had not been reached and work was continuing. Finnish finance minister Alexander Stubb said they didn't have anything on the table because the negotiations with the institutions are still continuing, but it was hoped that a concrete proposal would be reached at one o'clock in the afternoon on Thursday.
Although it did not discuss details, Eurogroup is reported to be prepared to extend the aid programme.
A new meeting of finance ministers will start at 1 pm on Thursday 25 June, a few hours before the opening of a European Summit of heads of state, which already has a packed agenda (see related articles). After negotiating in vain all afternoon at the European Commission headquarters, the Greek prime minister, Alexis Tsipras, and his country's lenders, represented by the presidents of the European Commission and ECB, Jean-Claude Juncker and Mario Draghi, the head of Eurogroup, Jeroen Dijsselbloem, and the IMF director general, Christine Lagarde, were due to resume talks at 11 pm on Wednesday evening.
The Greek authorities said in a press release reported in the Guardian: “The Greek government delegation came to today's negotiation based on the text of the proposal which institutions had accepted as a base of discussion on Monday (see EUROPE 11340). The institutions, for their part, tabled a new proposal which transfers the burden [of austerity] to wage-earners and pensioners in a way which is socially unfair while at the same time suggesting measures to avoid the increase of burden on those who have (to give). The Greek side cannot agree with such a [change of] direction. Negotiations are continuing at all levels.'
Earlier in the day, before arriving in Brussels, Tsipras tweeted that “the repeated rejection of equivalent measures by certain institutions never occurred before - neither in Ireland nor in Portugal,” both of which were subject to a financial bailout plan from the eurozone and IMF. He added: “This odd stance seems to indicate that either there is no interest in an agreement or that special interests are being backed.”
Before Tsipras joined them, the representatives of the 'institutions' met to decide on a common negotiating position. The 'institutions' had submitted a document with comments on the Greek proposals. One of the sticking points, already mentioned by sources on Monday, concerns the overall balance of the reform package, which the country's lenders say is not “growth-friendly” enough. The IMF is reported to feel that the plan is over-reliant on tax increases rather than spending cuts, particularly for pensions. The 'institutions' are also calling for reform of the pension system to start on 1 July 2015, whereas the Greeks want to wait until the end of October. Greece wants to increase corporate tax to 29%, but the 'institutions' say it should not go above 28% (compared with the current rate of 26%). For VAT, there is a slight gap between Greece's income targets (0.74% of GDP) and those of the 'institutions' (1%). In its proposals, Athens reduced the number of products exempt from VAT at 23%, but the lenders want 23% VAT to be levied on hotel and catering. The Financial Times reports that although Greece initially pledged to scrap the reductions on VAT for the Greek islands, it has done a U-turn on this. The 'institutions' want the planned spending cuts for defence to be doubled to €400 million from the €200 million suggested by Greece.
It seems that the Greek government would have enough votes to get an agreement voted in by the Greek parliament, but the eurozone says that Tsipras must be able to keep his political majority after the vote. Wanting Greece to reach agreement with its lenders, the head of the centrist 'To Potami' opposition party, Stavros Theodorakis, was in Brussels on 24 June for talks with Commissioner Pierre Moscovici. (Elodie Lamer and Camille-Cerise Gessant)