Euro-area leaders met Monday to discuss a new proposal made by Greek Prime Minister Alexis Tsipras’s government to avert default. It was welcomed as the most credible plan since negotiations began five months ago.
Here is where progress was made:
* Primary-surplus targets They’re closer to what creditors are demanding. This is what Valdis Dombrovskis, European Commission vice president for euro policy, said: “It’s in line with the institutions’ proposals, meaning surpluses in the next four years is 1, 2, 3, 3.5 percent” of gross domestic product respectively.
* Pensions and taxes Greece has now proposed steps to eliminate early retirement options and hike the sales tax and increase tax surcharges that middle- and high-income earners pay. Also, a levy on companies with annual net income of more than 500,000 euros ($568,000).
Here are the problems that remain:
* Too little, too late? What the Greeks have come up with is a "basis." International Monetary Fund Managing Director Christine Lagarde said an “enormous” amount of work still remains and the clock is running on a June 30 deadline when about 1.5 billion euros ($1.7 billion) is owed to the global lender of last resort.
* Are there enough spending cuts? There is a 200 million-euro reduction in defense spending, but what else? Proposals like taxes on private jets will only affect a sliver of the population.
* Tax rate Creditors want savings from value-added tax in 2016 of 1 percent of GDP. Greece has come up with a solution that would net 0.74 percent of GDP.
* Will it last? Until now, Greece has lived month by month. French President Francois Hollande said a durable agreement is one that won’t require yet another intervention “in three months, six months.”
* Debt relief Tsipras insists creditors must reduce Greece’s debt burden. The IMF says Greek’s debt level is unsustainable. Germany, the biggest contributor to the bailout, is among the euro-area nations reluctant to back such plan.
* Ratification Any agreement must go through parliament in both Greece and Germany. Tsipras will have to sell the deal to a body dominated by lawmakers opposed to anything that smacks of austerity. Germany won’t even submit an aid packet to its lower house until the Greeks pass the economic legislation first.
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