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| Eurozone crisis: Greek austerity plans meet warm but cautious response | Eurozone crisis: Greek austerity plans meet warm but cautious response |
| (about 2 hours later) | |
| Eurozone finance ministers are poised to offer their tentative backing for Greek bailout proposals, after Athens caved in to creditor demands for further austerity measures in return for the promise of limited debt relief. | Eurozone finance ministers are poised to offer their tentative backing for Greek bailout proposals, after Athens caved in to creditor demands for further austerity measures in return for the promise of limited debt relief. |
| The provisional support for a deal is likely to come ahead of a formal meeting of all 19 eurozone finance ministers on Saturday, which will consider the package of measures, and an emergency summit of EU leaders on Sunday. | The provisional support for a deal is likely to come ahead of a formal meeting of all 19 eurozone finance ministers on Saturday, which will consider the package of measures, and an emergency summit of EU leaders on Sunday. |
| The hope in Athens appeared to be that its capitulation to demands for €13bn (£9.36bn) of public spending cuts and reforms would bring a commitment from Brussels for a third bailout, the promise of debt relief, and crucially for an economy on its knees, a flood of cash into its banking system from the European Central Bank. | The hope in Athens appeared to be that its capitulation to demands for €13bn (£9.36bn) of public spending cuts and reforms would bring a commitment from Brussels for a third bailout, the promise of debt relief, and crucially for an economy on its knees, a flood of cash into its banking system from the European Central Bank. |
| Related: Tsipras rattled his sabre until it was blunt – and for what? | Related: Tsipras rattled his sabre until it was blunt – and for what? |
| Industrial production figures on Friday showed that Greek output fell 4% during May, compared with 0.4% growth in April, underling how far and fast the economy slumped as the debate over a creditor bailout dragged on. | |
| Stock markets raced ahead across Europe and Greek borrowing costs improved on the international bond markets following messages of support from François Hollande and comments by the EU president, Donald Tusk, that a deal could be reached to save Greece from crashing out of the eurozone. | |
| The Greek prime minister, Alexis Tsipras, was in parliament seeking the backing of MPs for the deal, with several of his supporters playing down the possibility of a major split in his own radical leftist party, Syriza. | |
| Related: Greek debt crisis: What's in the proposals from Athens? | Related: Greek debt crisis: What's in the proposals from Athens? |
| In the 13-page document sent to Greece’s creditors on Thursday night, Tsipras outlined plans for severe cuts on hitherto protected privileges such as pensions, tax breaks for the country’s islands and limits on military spending. In exchange, Greece wants a three-year €53.5bn loan deal to save the country from bankruptcy and kickstart its wrecked economy. | |
| The French CAC leapt by 2.4%, the German DAX gained 1.6%, and in London the FTSE 100 rose 70 points, or 1%, as traders welcomed signs of a breakthrough. | The French CAC leapt by 2.4%, the German DAX gained 1.6%, and in London the FTSE 100 rose 70 points, or 1%, as traders welcomed signs of a breakthrough. |
| There was some caution, however, over the scale of the capitulation. Chris Weston of IG, said: “The Greek public voted against austerity last Sunday, yet what we have seen is a giant step closer towards the creditors’ prior proposal which was subsequently rejected, ironically by Tsipras.” | There was some caution, however, over the scale of the capitulation. Chris Weston of IG, said: “The Greek public voted against austerity last Sunday, yet what we have seen is a giant step closer towards the creditors’ prior proposal which was subsequently rejected, ironically by Tsipras.” |
| German leaders also expressed surprise at the scale of the climbdown by Tsipras and the likelihood that a third bailout could put the Greek economy on a sustainable footing. | German leaders also expressed surprise at the scale of the climbdown by Tsipras and the likelihood that a third bailout could put the Greek economy on a sustainable footing. |
| Related: Greek debt crisis: Tsipras urges MPs to back bailout plan - live | |
| Alexander Graf Lambsdorff, vice-president of the European parliament, and a member of Germany’s liberal FDP said he had been studying the Greek submission and felt that several issues were missing from it. | Alexander Graf Lambsdorff, vice-president of the European parliament, and a member of Germany’s liberal FDP said he had been studying the Greek submission and felt that several issues were missing from it. |
| He said: “For example there’s nothing in there about the role of the Orthodox church, which is after all, the biggest landowner in Greece. There’s little about reform of the financial authorities and that is a very decisive question, because whether you set the corporate tax at 26% or 28% is in the end not nearly so important as whether you actually collect it. | He said: “For example there’s nothing in there about the role of the Orthodox church, which is after all, the biggest landowner in Greece. There’s little about reform of the financial authorities and that is a very decisive question, because whether you set the corporate tax at 26% or 28% is in the end not nearly so important as whether you actually collect it. |
| But the Social Democrat MEP Axel Schäfer welcomed the Greek reform list, calling it an “important development, because the government as well as the most important opposition parties have agreed on it”. The SPD member said Greece must receive a further bailout package. “That is to say, it needs new financial measures that can be paid back over a very very long timeframe,” he said. As to whether the creditors will accept it, he said: “I hope so.” | But the Social Democrat MEP Axel Schäfer welcomed the Greek reform list, calling it an “important development, because the government as well as the most important opposition parties have agreed on it”. The SPD member said Greece must receive a further bailout package. “That is to say, it needs new financial measures that can be paid back over a very very long timeframe,” he said. As to whether the creditors will accept it, he said: “I hope so.” |
| Schäfer is of the view that a majority of the Bundestag would vote in favour of a third bailout, although he added Merkel would find it easier to get the agreement of the SPD, which is the junior partner in the coalition, than those within her own conservative bloc. | Schäfer is of the view that a majority of the Bundestag would vote in favour of a third bailout, although he added Merkel would find it easier to get the agreement of the SPD, which is the junior partner in the coalition, than those within her own conservative bloc. |
| Tsipras faces a rough ride from Greek MPs opposed to giving any ground to the paymasters in Brussels and the IMF, in the wake of more than 60% of people rejecting more austerity in the 5 July referendum. | Tsipras faces a rough ride from Greek MPs opposed to giving any ground to the paymasters in Brussels and the IMF, in the wake of more than 60% of people rejecting more austerity in the 5 July referendum. |
| Related: Key points: Greece's proposals to help end talks deadlock | Related: Key points: Greece's proposals to help end talks deadlock |
| In a sign of possible trouble ahead, the energy minister, Panagiotis Lafazanis, who leads the most radical wing of the ruling Syriza party, did not sign the package. Another key figure on the left, Zoe Konstantopoulou, the president of parliament, has publicly announced that no new memorandum outlining further austerity will be passed by the 300-seat House. However, she met Tsipras on Thursday night and left his office without making any comment. | In a sign of possible trouble ahead, the energy minister, Panagiotis Lafazanis, who leads the most radical wing of the ruling Syriza party, did not sign the package. Another key figure on the left, Zoe Konstantopoulou, the president of parliament, has publicly announced that no new memorandum outlining further austerity will be passed by the 300-seat House. However, she met Tsipras on Thursday night and left his office without making any comment. |
| Government insiders are saying the proposals were sent at 10pm Greek time (8pm BST) to all three creditors and the president of the Eurogroup of finance ministers, Jeroen Dijsselbloem. The Dutch finance minister must sign off on the reforms before they are submitted for further discussion to EU leaders. | Government insiders are saying the proposals were sent at 10pm Greek time (8pm BST) to all three creditors and the president of the Eurogroup of finance ministers, Jeroen Dijsselbloem. The Dutch finance minister must sign off on the reforms before they are submitted for further discussion to EU leaders. |
| The proposed package was tabled in parliament as an emergency bill on Thursday. It will, say officials, be put to vote on Friday evening in order to invest Tsipras, his deputy Yannis Dragasakis and finance minister Euclid Tsakalotos with the appropriate authority to conduct talks around the proposed reforms. | The proposed package was tabled in parliament as an emergency bill on Thursday. It will, say officials, be put to vote on Friday evening in order to invest Tsipras, his deputy Yannis Dragasakis and finance minister Euclid Tsakalotos with the appropriate authority to conduct talks around the proposed reforms. |
| Until a cast-iron agreement is reached, the vote will not be binding – rather it is aimed exclusively at furnishing the central protagonists in Greece’s negotiating team with the authority to debate with creditors around the proposed reforms. Once negotiations are completed it will become law. | Until a cast-iron agreement is reached, the vote will not be binding – rather it is aimed exclusively at furnishing the central protagonists in Greece’s negotiating team with the authority to debate with creditors around the proposed reforms. Once negotiations are completed it will become law. |
| Syriza MPs may also gather to vote on the measures. A senior member of the party’s parliamentary group said he was asked to be on standby to vote on the package on Friday. “We have all been told to be here. We may have to vote on it tomorrow,” he said. | Syriza MPs may also gather to vote on the measures. A senior member of the party’s parliamentary group said he was asked to be on standby to vote on the package on Friday. “We have all been told to be here. We may have to vote on it tomorrow,” he said. |
| Among the extra measures agreed by Tsakalotos and his team to secure a third bailout are a slew of tax increases including a 23% value added tax on restaurants and catering, a reduced 13% tax on basic foodstuffs, energy hotels and water and a so-called “super reduced” rate of 6% on pharmaceuticals, books and theatre. Corporate tax will increase from 26 to 28% and farmers will lose preferential tax treatment and fuel subsidies. | Among the extra measures agreed by Tsakalotos and his team to secure a third bailout are a slew of tax increases including a 23% value added tax on restaurants and catering, a reduced 13% tax on basic foodstuffs, energy hotels and water and a so-called “super reduced” rate of 6% on pharmaceuticals, books and theatre. Corporate tax will increase from 26 to 28% and farmers will lose preferential tax treatment and fuel subsidies. |
| Pension reforms that would bring permanent savings of 0.25 to 0.5% of gross domestic product in 2015 and 1% of GDP in 2016 and beyond are also part of the package. Measures aimed at achieving those numbers include discouraging early retirement and standardising the retirement age to 67 by 2022. | Pension reforms that would bring permanent savings of 0.25 to 0.5% of gross domestic product in 2015 and 1% of GDP in 2016 and beyond are also part of the package. Measures aimed at achieving those numbers include discouraging early retirement and standardising the retirement age to 67 by 2022. |
| But Athens is still at odds with its creditors over defence spending. The military budget will be cut by €100m this year and double of that in 2016 under the latest proposals, compared to the €400m cut this year demanded by the troika. | But Athens is still at odds with its creditors over defence spending. The military budget will be cut by €100m this year and double of that in 2016 under the latest proposals, compared to the €400m cut this year demanded by the troika. |