Monday

19th Nov 2018

Tsipras agrees to more austerity in exchange for more aid

  • Protester showing solidarity with Greece in Paris. Greece has unveiled a €13 billion austerity package Thursday ahead of Sunday's crunch summit (Photo: Laurent Sauvebois)

The Greek government has unveiled plans for a €13 billion austerity budget in a last-ditch attempt to secure a debt deal with its EU creditors.

The proposal sent to Brussels Thursday evening (9 July), sets out plans to save around €13bn, far more severe than the package of €8 billion of spending cuts and tax rises contained in the proposal rejected by Sunday's referendum.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

It has also been submitted to the Greek parliament and is set to be debated and voted on Friday,

It contains much of what was proposed to creditors two weeks ago, including increasing the retirement age to 67, but goes further in the areas of VAT reform and pensions. The plan would also scrap Greece’s scheme of offering supplementary pensions to the poorest people by 2019, a year ahead of the 2020 deadline previously proposed.

It also includes increases to VAT aimed at generating savings worth 1 percent of GDP, and a further €300 million in cuts to defence spending over the next two years.

More controversially, the left-wing Syriza government is proposing to increase taxes on low earners if its proposals lead to ‘fiscal shortfalls’.

Should the package not raise the €13 billion target, the government will increase taxes on incomes below €12,000 from 11 percent to 15 percent, and to 35 percent on wages over €12,000.

On Sunday, Greeks voted by a decisive 61 to 39 percent margin to reject the last bailout offer put to their government by the EU and IMF. However, with a majority of Greeks, including ‘No’ voters, anxious that the country should remain in the single currency, Tsipras appears to have backed down from his promises to end austerity.

In return, Greece is hoping for a third EU bailout, featuring a three-year loan package worth €53.5bn, and for its EU creditors to restructure its debt burden which stands at 175 percent of economic output.

“With this proposal the Greek people and the Greek government, confirm their commitment to fulfilling reforms that will ensure that Greece remains a member of the eurozone, and ending the economic crisis,” said Greek prime minister Alexis Tsipras in a letter sent on Thursday to the Presidents of the European Commission and European Central Bank.

Greece’s creditors and eurozone finance ministers will now consider the new proposal on Friday ahead of a leaders’ summit on Sunday, widely billed as the last chance to prevent Greece tumbling out of the eurozone and into a messy default on its debts.

Earlier on Thursday, EU leaders traded rhetoric over whether a portion of Greece’s debt pile, widely seen as unsustainable by economists, could be restructured.

“The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors,” European Council president Donald Tusk, who will chair Sunday’s summit, told reporters on Thursday. “Only then will we have a win-win situation,” Tusk added.

However, German finance minister Wolfgang Schaueble, consistently hawkish on the issue, warned that “the room for manoeuvre through debt reprofiling or restructuring is very small”.

Oliver Blanchard, the IMF’s chief economist, also weighed in to the debate, a week after the Fund warned that up to 30 percent of Greece’s debt would have to be written off in order to make the overall debt burden sustainable.

In a blogpost, Blanchard commented that the economic chaos caused by two weeks of capital controls in Greece “may well imply the need for even more financing, not least in support of the banks, and for even more debt relief than in our DSA (debt sustainability analysis)”.

Tusk urges creditors to mellow on Greek debt

Tusk has said Greece's creditors should consider debt sustainability if Athens tables realistic reform, in what amounts to a more active role in the crisis by the former Polish PM.

Greece says No to creditors

In a result that sent shockwaves across the EU, around 60 percent of Greek voters Sunday rejected the bailout reforms proposed by creditors.

Moment of truth for Merkel on Greece

Merkel will make the ultimate decision on Greece on Sunday, at a summit whose outcome will have major implications for the future of Europe.

Opinion

Panic is not answer to EU's security challenges

EU foreign ministers must choose between contaminating their civilian missions and operations with panic over security and migration, and reaffirming the EU's core values as a global actor for peace and development.

News in Brief

  1. Germany and France agree eurozone budget framework
  2. Austrian foreign minister: EU's Israel policy 'too strict'
  3. Soros and Kurz discuss Central European University move
  4. EU set to tighten rules on foreign strategic investment
  5. Macron repeats call for unified Europe in Bundestag speech
  6. US warns EU banks and firms against trading with Iran
  7. Merkel urged Romania not to move embassy to Jerusalem
  8. Protesters call for Czech leader to step down

Opinion

EU must recognise new force for Balkans destabilisation

EU foreign ministers will discuss Bosnia and Herzegovina on Monday. The EU has the opportunity to show that it is not a political dwarf in the Balkans, where not only economic, but also political reforms are necessary.

Agenda

Brexit dominates EU affairs This WEEK

All eyes on London this week, where May struggles to hold onto power against Brexit rebels, while EU leaders meet in Brussels on Sunday to try to clinch agreement.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. Panic is not answer to EU's security challenges
  2. Dutch flesh out proposal for EU human rights sanctions
  3. EU cheerleaders go to Russia-occupied Ukraine
  4. EU must recognise new force for Balkans destabilisation
  5. Brexit dominates EU affairs This WEEK
  6. How the EU commission got tunnel vision on self-driving cars
  7. No-confidence calls against May put Brexit deal in doubt
  8. Key points of the Brexit deal (if it ever comes into effect)

Stakeholders' Highlights

  1. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  2. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  3. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  4. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  5. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  6. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  7. Mission of China to the EUChina: Work Together for a Better Globalisation
  8. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  9. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  10. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  11. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  12. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future

Join EUobserver

Support quality EU news

Join us