For the last five months, global markets, economists and politicians have had to watch the slow car crash that is the reforms-for-rescue talks between Greece and its creditors.
But events look set to quickly come to ahead in the coming week as Greece looks unlikely to make a 1.6 billion euro ($1.79 billion) payment due to the International Monetary fund (IMF) on June 30.
Here is the lowdown on what’s preventing a deal from being struck in the latest round of talks in Brussels.
Q. What are the latest reforms Greece has proposed?
A. As reform talks with creditors reached crisis point this week, Greece presented new a set of proposals on Monday. This was followed by a list of “prior actions” – officialese for the fine print – Tuesday, detailing the steps it would take in order for it to qualify for a last tranche of bailout aid worth 7.2 billion euros.
Much to the chagrin of those overseeing Greece’s bailout program — the European Commission, European Central Bank and International Monetary Fund — the reforms document, published by the Financial Times, centred on raising taxes rather than on spending cuts, which creditors have demanded.
While Greece proposed raising taxation on businesses and the wealthy, as well as some sales tax increases, it also said it would slowly phase out early retirement from 2016 to 2025 but that it would maintain a special benefit for some low-income pensioners. It also said it would meet creditor demands for a primary budget surplus of 1 percent in 2015 and 2 percent in 2016 too.
Q. So what’s the problem?
A. Greece’s reform measures did not come up to the standards demanded by its creditors, who sent back the proposed reform package covered in red ink corrections and proposals crossed out.
It’s certain that Greece had “red lines” of its own in the proposals, however. Athens said it would not carry out some privatisations or raise sales tax on restaurants and electricity, as required by lenders. In fact, it said it would cut, rather than raise, the levy on medicines. It also said it would not cut public sector wages. Of the reported 7.9 billion euros that the Greek government said the plan would raise, 92 percent came from tax increases.