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Greece's 'tough' new reform proposals dissected

The Greek government has expressed its optimism that a set of reforms proposed to the country's bailout lenders will unfreeze urgently needed funding. DW examines the reforms described as "tough measures" by Athens.

Following a crisis summit of EU leaders on the debt crisis, Greek government spokesman Gabriel Sakellaridis said the climate at the summit in Brussels on Monday had "surely improved" and that the parties were "closer to a deal."

Talking to Greek TV channel Antenna on Tuesday, he admitted the leftist government in Athens had made several concessions on its earlier reform proposals, adding that Prime Minister Alexis Tsipras had to battle to protect vulnerable citizens in his country.

"I hope the lenders will accept this, which it seems they will," he said.

Greece's latest proposals, described by Sakellaridis as "tough measures," include a fiscal adjustment amounting to about 8 billion euros ($9 billion) by the end of 2016. They envisage mainly higher taxes on consumers, businesses and the wealthy, plus pension reforms focusing on phasing out early retirement.

Here is a summary of the proposal as spelled out by Greek government officials:

Pensions

Greece's early retirement scheme is to be curbed gradually from 2016 to 2025, but with exemptions kept for some specific categories, including difficult professions and mothers with disabilities.

A special benefit for some low-income pensioners, amounting to between 57 and 230 euros a month is scheduled to be replaced from 2020 with a new protection framework for low pensions. This, however, remains a key point of friction between Greece and its creditors, who wanted the benefit to be scrapped altogether.

Taxes

Most controversially discussed is also Greece's three-tier VAT system, with rates of 23 percent, 13 percent and 6 percent. Athens wants electricity and restaurants to be taxed at 13 percent instead of being raised to 23 percent, as lenders had demanded.

Moreover, the rate for medicines is to be cut to 6 percent in contrast to a creditor demand to hike the rate to 11 percent. Generally, bailout lenders want only a VAT system with two rates of 11 percent and 23 percent.

Less controversial is a plan by the Syriza government to slap a "solidarity tax" on higher income earners with revenues above 50,000 euros, while lowering the tax for revenues below 30,000 euros. Syriza also seeks to introduce an additional tax of 8 percent on revenues above 500,000 euros.

Other tax plans include a special levy of 12 percent on corporate profits beyond 500,000 euros, an increase in luxury taxes on pools, planes, big cars and private boats over 10 meters (33 feet), as well as a gambling tax on slot machines.

Privatizations

Following a stop on all privatization earlier this year, Athens promises to restart the sale of state assets on condition that investors unleash a "minimum amount of investment" to promote local economy and ensure a "participation of public equity."

In turn, the lenders are being asked to accept that the transfer of Greece's stake in the country's telecoms operator to the privatization agency won't go ahead.

In addition, Greece wouldn't have to privatize its power grid operator ADMIE nor its dominant power utility PPC, as requested by creditors.

State spending

Athens has demanded in its plan that public sector wages won't be cut below levels reached at the end of 2014, but has agreed to reduce its defense spending by 200 million euros.

A matter of huge controversy in recent talks was also the primary budget surplus - revenues without debt servicing - Greece would have to achieve in the years ahead.

The government finally offered to agree to a lenders' demand of reaching a primary surplus of 1 percent of gross domestic product (GDP) in 2015 and 2 percent in 2016.

This marks the most significant policy change because Athens had previously insisted on a much lower 0.6 percent of GDP this year, to be followed by 1.5 percent in 2016 and 2.5 percent in 2017.

Debt and investment

However, Greece has repeated an earlier demand for the European Stability Mechanism to lend it money to buy back 27 billion euros of its bonds from the European Central Bank - effectively meaning a roll-over of debt on more favorable terms.

In exchange for its concession, Greece also wants EU funding for financing infrastructure projects and new technologies through an investment package from the European Commission and the European Investment Bank.

uhe/bk (Reuters, dpa)

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