Greece has submitted a 13-page set of proposals to its European creditors that is intended to act as a foundation to free up a new three-year, 53.5-billion euro bailout package to save the nation from bankruptcy. Here are the main points of the package that the Greek parliament will debate Friday.
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BUDGET TARGETS:
The Greek government is pledging to stick to primary surplus targets — meaning that the government is earning more in taxes than it is spending — of 1 percent this year, 2 percent in 2016, 3 and 3.5 percent in 2017 and 2018 respectively.
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SALES TAX REFORM:
The proposals include a slew of tax hikes including a 23 percent value added tax on restaurants and catering, a reduced 13 percent tax on basic foodstuffs, energy hotels and water and a so-called "super reduced" rate of 6 percent on such things as pharmaceuticals, books and theater — perhaps appropriate for a country that pioneered drama. The new tax levels will kick into gear this October.
Moreover, special tax breaks for the country's islands — popular tourist magnets — will be scrapped. Only the most remote islands will get to keep the coveted tax breaks.
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FISCAL REFORM:
Military spending will be slashed by 100 million euros this year and double that in 2016. Corporate tax will increase from 26 to 28 percent and farmers will lose preferential tax treatment and fuel subsidies. The government will enact a clamp-down on tax dodgers. The country's huge shipping industry will also see a tonnage tax hike and the industry's preferential tax treatments will be phased out. A luxury tax will be extended to cover recreational vessels over five meters (16.4 feet) and the rate will jump from 10 to 13 percent.
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PENSION REFORM:
The government is looking at reforms that would bring permanent savings of ¼-½ percent of gross domestic product in 2015 and 1 percent of GDP in 2016 and beyond. Measures aimed at achieving those numbers include discouraging early retirement and standardizing the retirement age to 67 by 2022 — except for those performing "arduous jobs" and mothers raising kids with a disability.
Social pensions will be better targeted, while supplementary pension funds will be financed by employees' own contributions. Perks such as a solidarity fund will be gradually phased out and health contributions for pensioners will jump from 4 to 6 percent on average. More reforms will kick in to make the pension system more sustainable, including an overhaul of pension contributions for all self-employed.
Authorities will also vet reforms to make sure that they're fair.
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PUBLIC SECTOR REFORM:
Authorities will shape up public sector wages to ensure that they're on a downward trajectory by 2019 and that they fit "the skill, performance and responsibility" of staff. Perks such as paid leave and travel allowances will be streamlined to conform with EU norms. A plan to make it easier to reassign public sector workers to different posts wherever they're needed will also be introduced. A new strategic plan to fight corruption will be drawn up by the end of this month while new laws will make political party finances more transparent and protect financial crime investigations from political interference.
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TAX ADMINSTRATION:
The government will set up an autonomous tax revenue agency and enact reforms streamline tax collection, track down tax cheats and combat fuel smuggling.
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FINANCIAL SECTOR:
Amendments on insolvency laws will aim to get debtors to pay up loans, while consultants will help on how to deal with bad loans. Steps will also be taken get foreign investors to pour their money into Greek banks.
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PRODUCT MARKET:
The government will open restricted professions such as engineers, notaries and court bailiffs. It will draw up laws aimed at getting rid of red tape and making it easier to get business licenses, while reforming the gas market.
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PRIVATIZATIONS:
The government will look at selling off state assets and will get the ball rolling on privatizing the electricity grid company, regional airports and ports including Pireaus and Thessaloniki.