Gaps Remain as EU Pushes for Greece Deal: Fact SheetBen Sills
Euro-area finance ministers are gathering Wednesday in Brussels to prepare the ground for a European Union summit aimed at striking a deal with Greece on financial aid. This is the state of play:
* Primary-surplus targets -- DEAL
Greece has agreed to meet the budget targets creditors set out, according to Valdis Dombrovskis, European Commission vice president for euro policy. That means the country will have to deliver a primary surplus of 1 percent of gross domestic product this year and 2 percent in 2016, rising to 3.5 percent in 2018.
* Pensions -- NO DEAL
Greece has proposed steps to reduce early retirement, increase contributions and phase out an additional payment for the poorest retirees by 2020.
Creditors want the supplement eliminated three years earlier and insist the system must generate savings equivalent to 1 percent of GDP, according to an international official with knowledge of the discussions.
Creditors object to higher pension contributions and want the government to begin the process of eliminating early retirement benefits on June 30 instead of next year. The International Monetary Fund says Greece should do more to reduce the total cost of the pension system.
* Taxes -- NO DEAL
Greece has proposed raising sales tax and increasing the surcharges that middle- and high-income earners pay. It will also introduce a levy on companies with annual net income of more than 500,000 euros ($568,000) and hike the main corporate tax rate.
The IMF says that won’t do, and wants across-the-board tax increases, Greek Labor Minister Panagiotis Skourletis said Wednesday. Creditors want an extra 1 percent of GDP raised from sales tax. The Greek proposal projects 0.74 percent.
Greece plans to raise the corporate tax rate to 29 percent. The creditors insist that 28 percent is the limit, forcing Prime Minister Alexis Tsipras’s team to find more savings elsewhere.
IMF Managing Director Christine Lagarde, who said on Monday an “enormous” amount of work still remains, told the Fund’s board she also wants to see more reductions in government spending.
* Debt relief -- NO DEAL
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. French Finance Minister Michel Sapin said Wednesday the topic is not a taboo, but nor is it the most pressing issue.
If leaders reach a deal, further hurdles remain:
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 submit an aid packet to its lower house unless the Greeks pass at least some of the economic legislation first.
* Will it last?
Until now, Greece has lived week to week. French President Francois Hollande said a durable agreement is one that won’t require yet another intervention “in three months, six months.”
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