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Fresh Greek proposals over bailout

Published 09/06/2015

Greece's Prime Minister Alexis Tsipras hopes to strike a deal with EU leaders. (AP)
Greece's Prime Minister Alexis Tsipras hopes to strike a deal with EU leaders. (AP)

Greek officials say they have made new proposals aimed to strike a quick deal with bailout creditors and unlock vitally needed rescue funds.

The proposals were submitted late on Monday to the European Union's economic and monetary affairs chief, Pierre Moscovici.

A Greek official said the two texts contained alternative ideas on budget measures required for creditors to approve the bailout payment, and proposals on "a workable plan" to render Greece's crushing debt load viable.

The submission follows last week's impasse, when bailout creditors responded to a 47-page Greek proposal with a brief counter-offer that Athens rejected as containing "absurd" measures.

A deal must be struck before the end of June, when Greece's bailout program ends.

"We want a written and clear answer," State Minister Nikos Pappas said, in comment posted on a social media site, as PM Alexis Tsipras briefed officials in his radical left Syriza party on the negotiations.

The two sides mainly disagree on creditors' demands for Athens to raise the sales tax on food, medicine and power bills, labor market reforms and cuts to pensions.

These would be hard for the new government to implement less than five months after its election on a combative anti-austerity platform.

A deal must be struck before the end of June, when Greece's bailout program ends - and the pending 7.2 billion euro payment (£5.3bn) will no longer be available. Without the cash, Greece will be unable to pay its creditors, and would default on its loans.

Greece has already said it will bundle its four June debt repayments - all owed to the International Monetary Fund and totalling 1.6 billion euro (£1.2bn) - into one on June 30. The move, which is allowed under IMF rules, may be more a sign of defiance than absolute penury.

While Greece should still be able to pay pensions and salaries, and keep the essential functions of state running through tax revenues, a default would likely kill its banks.

The banks depend on emergency funding from the European Central Bank, but in the case of a government default, the state-backed guarantees they give the ECB as collateral for the emergency funding would become worthless.

The import-reliant country could then have to put limits on money transfers and withdrawals and see shortages of basic goods.

It could even have to ditch the euro as it adopts a devalued version of its old drachma currency to get liquid currency back into the banks and economy.

The price of vital imported goods would likely rocket under the new, weaker currency.

A spokesman for the Commission - which together with the ECB and the IMF oversees the rescue programme - said "diverse proposals are being circulated", but did not comment on what European officials thought of them.

"The three institutions are currently assessing these suggestions with diligence and care," Margaritis Schinas said in Brussels.

Speculation is now growing that the bailout deal could be extended months past its current end-June expiry.

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