Greece’s Last Chance Proposal Looks Similar

Greece’s reform proposals are strikingly similar to the ones Greek voters overwhelmingly rejected at a referendum only earlier this week. Yet, there are a few differences, some crucial and others less substantial.

Here is a list of where the two proposals converge and where they still stand apart:

Financing and Debt

Greece is asking for three-year loans of at least 53.5 billion euros ($59.9 billion) to cover its financing needs between 2015 and 2018. It is also seeking debt restructuring and reprofiling of its long-term debt due after 2022. The earlier proposals were in return for a five-month extension of an existing bailout program for loans of as much 15.5 billion euros and didn’t involve any debt restructuring. Fiscal targets remain the same with primary budget surplus seen at 1, 2, 3, and 3.5 percent of the gross domestic product between 2015 and 2018, even amid signs that the economy may have deteriorated under capital controls and shuttered banks for nearly two weeks.

Tax Reforms

With few exceptions, the Greek government adopts the creditors’ proposal on sales and corporate tax rates. The government is seeking to eliminate sales tax discounts on islands gradually by the end of 2016 instead of immediately, starting higher-income islands that are popular tourist destinations. It also seeks to keep hotels under a reduced 13 percent rate instead of the standard 23 percent.

Pension Reforms

The government is in agreement with the creditors in eliminating early retirement benefits and envisages savings of 0.25-0.50 percent of GDP in 2015 and 1 percent of GDP in 2016, effective from July 1, in line with demands under the earlier proposals. It proposes implementing a “zero-deficit” clause for supplementary and lump-sum pension funds, adopted in 2012, from October instead of immediately. While it agrees to phase out a supplementary allowance for low pensions by the end of December 2019, it wants to start phasing-out these benefits from March 2016 instead of starting immediately.


Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell