Greece reforms identical to the Juncker plan – ING

FXStreet (Barcelona) – With the Greek government sending its reform proposal to its creditors, the first glance at the documents suggests that the Greek government is budging and that a compromise should again be in reach, according to Carsten Brzeski of ING.

Key Quotes

“Last night’s package included three documents: a letter from Alexis Tsipras, a letter from the new finance minister Tsakolotos and a longer document with actions to take to get a bailout deal done. Judging from a first glance at the documents this morning, the new Greek proposals have much in common with the so-called Juncker plan, ie the latest proposals of the Eurozone creditors in the night Tsipras announced the referendum. Remember , the referendum which rejected an earlier version of the Juncker plan.”

“The Greek list is more or less identical with the Juncker plan on fiscal targets and other issues. Interestingly, the Greek government seems to budge on the two most critical issues, which over the last weeks repeatedly led to controversy and eventually to the referendum: VAT reform and pension reforms. As regards VAT reform, the Greek government now embraces earlier proposals for a standard VAT rate of 23%, with hotels in a lower 13% bracket and pharmaceuticals in the lowest 6% bracket. Greece even propose to gradually eliminate tax discounts for islands (an earlier hurdle for a compromise). As regards pension reforms, the government proposed to raise the effective retirement age to 67 by 2022. There are other smaller differences in terms of timing of the implementation but the move on the retirement age looks like a big concession.”

“Remarkably, the demands for debt relief have almost fully disappeared. While there are still, although only vaguely formulated in the official request for an ESM bailout package, there is no mentioning in last night’s documents. Almost at the same time, German chancellor Merkel yesterday said that a classical debt haircut was still not in option. Remember that Ms Merkel has an enormous talent in using words. Excluding a “classical” debt haircut does not automatically refuse other forms of debt relief.”

“Adding these elements up, our view that some kind of debt relief at the end of a long successful reform process is still an option.”

With the Greek government sending its reform proposal to its creditors, the first glance at the documents suggests that the Greek government is budging and that a compromise should again be in reach, according to Carsten Brzeski of ING.

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