NYT
Only a day after grim predictions of financial and social collapse in Greece, a scramble appeared underway to work out the details of a new bailout package to bring the country back from the brink of falling out of the euro.
As details of the new offer emerged, it appeared that Prime Minister Alexis Tsipras was capitulating to demands on harsh austerity terms that he urged his countrymen to reject in the referendum last Sunday, like tax increases and various measures to cut the costs of pensions.
He will seek the approval of Parliament on Friday. Much may hinge on his ability to persuade the more radical elements of his Syriza party to support a package that in essence was anathema to many of them last week.
What was breathtaking, however, was how in a matter of hours the entire dynamic in the Greek crisis seemed to shift, from apocalyptic warnings of a Zimbabwe in the Balkans, to a fresh optimism that the basics of a deal could be worked out.
Prospects for a deal improved through the day as a procession of European leaders came around to Mr. Tsipras’s conviction that pure austerity measures were insufficient in their own right and had to be accompanied by a commitment to reduce the burden of Greece’s stupendous debt.
Greece received vital political support and technical assistance from France, help that highlighted the contrasting approaches being taken by the two leading powers in the European Union. Germany has played the bad cop, standing firm against concessions to Greece and, in Mr. Schäuble’s case, openly doubting that the country really belonged in the eurozone. France has thrown itself into the task of finding a deal.
The French assistance appeared to be an effort to make sure the Greek proposal, submitted just before a midnight deadline, would be as thorough and salable as possible to Greece’s creditors and would smooth the way for a compromise on a new bailout package to keep Greece afloat financially and inside the euro.
France has been the most steadfast major nation in Europe supporting Greece ever since Mr. Tsipras was ushered in to power in January on a mandate to repudiate austerity. Paris has been particularly outspoken in recent days about the need for a compromise that would help Greece and hold the eurozone together.
Neither French nor German officials would discuss France’s involvement in the Greek proposal in any depth. But the development raised questions about whether France and Germany have split heading into the final negotiations or whether there is a back-room understanding between Paris and Berlin.
Ms. Merkel, speaking later in Sarajevo, reiterated her opposition to actually writing off some of Greece’s debt, though she was less definitive about steps like reducing interest rates or extending the payment period as ways of helping Greece manage its indebtedness.
Germany has taken an increasingly hard line toward Greece since the nation voted no on Sunday to an earlier bailout program in a referendum that sent political shivers across Europe. In the wake of the chaos sparked by the vote, Ms. Merkel flew Monday to Paris to join President François Hollande of France to discuss what to do next with Greece.
The situation has put Mrs. Merkel into the toughest position of her career. She has been forced to balance an angry German public, which sees no reason to give Greece billions of additional bailout money or to write down its debt, against the danger of a Greek exit from the eurozone.
Greece is a tiny country with limited economic impact on Europe, but considerable strategic value. European political experts had wondered throughout the week whether Ms. Merkel, as the leader of the most powerful country in Europe, would stand for becoming the first postwar European leader to countenance the first step back in Europe’s march toward greater integration.
They also wondered if she was willing to risk the prospect of a failed, embittered state within the European Union and NATO, an open wound in Europe’s southern and eastern flank that would be an open invitation to Moscow to exploit already inflamed division within the European Union.
Prime Minister Manuel Valls of France on Wednesday told lawmakers in the National Assembly on Wednesday in a speech that was broadcast live on Greek television, “France refuses that Greece leaves the eurozone in the name of our position and our commitments.” To secure a deal, though, he said Greece needed to pledge to modernize its economy and overhaul pensions.
He also suggested that Mr. Tsipras’s most pivotal request — a program to make Greece’s mountainous debt more sustainable — be taken seriously by other European countries. Until recently, that has been nearly a taboo idea in Europe’s halls of power, since European taxpayers are currently on the hook if Greece defaults on its debts.
NPR
The new proposals include sweeping reforms to VAT to raise 1% of GDP and moving more items to the 23% top rate of tax, including restaurants – a key battleground before.
Greece has also dropped its opposition to abolishing the lower VAT rate on its islands, starting with the most popular tourist attractions. Athens also appears to have made significant concessions on pensions, agreeing to phase out solidarity payments for the poorest pensioners by December 2019, a year earlier than planned. It would also raise the retirement age to 67 by 2022.
And it has agreed to raise corporation tax to 28%, as the IMF wanted, not 29%, as previously targeted.
Greece is also proposing to cut military spending by €100m in 2015 and by €200m in 2016, and implement changes to reform and improve tax collection and fight tax evasion. It will also press on with privatisation of state assets including regional airports and ports. Some government MPs had vowed to reverse this.
In return, Greece appears to be seeking a three-year loan deal worth €53.5bn.
The Greek government said parliament would vote on the proposals later today, before an emergency summit on Sunday of all 28 European Union leaders.
Many experts believe [the] debt, which is 177 percent of the country's gross domestic product, is unsustainable for a country that has not recovered from the 2008 financial crisis. Indeed, U.S. Treasury Secretary Jack Lew added his voice to calls for "Europe [to] ... restructure the debt in a way that is more sustainable." Christine Lagarde, the managing director of the IMF, one of Greece's toughest critics, echoed those calls.
But some European countries, especially Germany, have been reluctant. Chancellor Angela Merkel, on a visit to Bosnia on Thursday, appeared to rule out a "classic haircut" on Europe's loans to Greece.