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2nd Jul 2022

Leaked Juncker plan seeks to avoid Greek default

European Commission Jean-Claude Juncker sent a memo to the Greek government on Monday (18 May) outlining proposals to find an agreement in the bailout discussions, according to Greek newspaper To Vima.

The Greek prime minister’s office refused to comment on the leaked document, while EU Commission spokespeople said they "could not confirm" the report but did not deny it.

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  • The reported plan could allow Tsipras find a way to a deal (Photo: Constantine Gerontis)

According to the leaked paper, part of the €7.2 loan Greece has been waiting since a Eurogroup deal in February would be unblocked without there being comprehensive deal on reforms.

Under the plans, some money from the bailout fund (EFSF) would be unlocked in June while a full agreement between Greece and creditors on the next step forward would come in autumn.

It foresees the Greek government carrying out reforms by June that would result in expenditure cuts worth €5bn to cover the fiscal gap for 2015 and 2016.

According to To Vima, the European Commission is suggesting that €1.8 billion be paid in June as well as €1.9 billion from the profit made by the European Central Bank from the interest on Greek bonds bought on the secondary markets.

This would allow Greece to avoid defaulting on its upcoming payment deadlines.

The country will have to repay €1.5 billion to the International monetary fund (IMF) in June and €6.5 billion to the European central bank (ECB) in July and August.

Last week the Greek government repaid the IMF using money from an emergency fund and said it would face a major liquidity problem after it pays pensions and salaries at the end of May.

The Juncker plan also proposes less ambitious budget primary surplus targets of 0.75 percent of GDP in 2015 rather than 3 percent.

Lower primary surplus targets is a key demand by Athens to reduce austerity measures.

The third proposal reportedly made by Juncker is to postpone some reforms asked by Greece’s lenders.

According to To Vima, VAT reform would be introduced only in October and the discussion on pensions would take place "in the autumn".

Ccollective bargaining, one of Greece’s "red lines" in the current talks, would be reevaluated "in light of the International labour organization's (ILO) recent report on 'better practices' in the EU's job market".

The Juncker proposal contains a mix of concessions such as measures to address the “humanitarian crisis in Greece” but maintains some unpopular ones such as a recent property tax.

The proposal "paves the way towards an honest compromise," tweeted MEP Dimitrios Papadimoulis, who hails from the governing left-wing Syriza party. He is the first politician to give credence to To Vima’s report.

Juncker’s leaked proposal follows a report by the UK’s Channel 4 over the weekend saying the IMF believed Greece would default on 5 June, the day of the next repayment deadline.

There have also been reported differences between Athens’ creditors over whether a Greek debt haircut should be considered with the IMF in favour.

While To Vima said that the Greek government, the ECB and the IMF have all received the proposal, others said this was not the case.

One official involved in the talks, quoted by the Financial Times after the leak, said neither the ECB nor the IMF were aware of the Juncker proposal.

"We are thunderstruck," the official said.

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