Yesterday Greece’s government handed over a list of austerity reforms to Greece’s creditors after asking for a new 3 year bailout loan deal to keep the indebted country from going bankrupt and exiting the 19 member euro currency union.
European creditors have grown increasingly frustrated with Greece’s leftist government for failing to accept recommended austerity reforms and insisted that this is the final chance for Athens to produce a realistic list of reform measures to qualify for bailout funding.
Late on Thursday Greece’s government requested a €53.5 billion 3 year loan while moving closer to adopting a series of austerity reforms demanded by their creditors that includes tax increases, pension cuts, and steps to liberalize Greece’s economy.
The new 13 page bailout loan proposal will be presented to Greece’s parliament for approval on Friday which is dominated by Prime Minister Alexis Tsipras’ leftist Syriza Party that came to power in January on an anti-austerity platform.
Eurozone Finance Ministers will review the proposal on Saturday and Eurozone leaders plan to vote on it during a summit meeting on Sunday.
The bailout proposal consists of VAT tax increases for hotels and restaurants, pension cuts, raising the retirement age up to 67, and implementing a roadmap for privatizing state assets such as regional airports and the Piraeus port.
Special tax emptions for Greece’s islands would also be removed while the corporate tax rate is increased from 26 to 28 percent.
The proposed austerity reforms are estimated to generate €13.2 billion in revenue over the next 2 years to help repay Greece’s debt from its first two bailout packages since 2010 which total €240 billion.
On June 30th Greece’s temporary bailout extension expired and Greece defaulted on a €1.6 billion loan owed to the IMF.
Later this month on July 20th Greece owes another €3.5 billion to the ECB and currently lacks sufficient funding to pay without a new bailout deal.
Due to Greece’s recent debt problems, Greek banks were shut down since June 29th with capital controls imposed across the country.
Representatives from the IMF and European Council have been making public statements in favor of debt restructuring for Greece, despite some earlier resistance from Greece’s largest creditor nation, Germany, and no specific mention of it in the current proposal.
“The Greek reform bill will have to be matched by an equally realistic proposal on debt sustainability from the creditors”, European Council President Donald Task said yesterday.
“Only then will we have a win-win situation. Otherwise, we will continue the lethargic dance we have been dancing for the past five months” Task added.