The proposal for an agreement that was presented to Prime Minister Alexis Tsipras on Wednesday by the European Commission chief Jean-Claude Juncker includes a series of tough measures and tax hikes. The proposal is comprised of a 7-page list of prior actions and 5-page list of policy commitments.
The EC, ECB and IMF proposal requires that a supplementary budget and a medium-term fiscal strategy (MTFS) for 2016-19 be adopted as of the 1st of July 2015. This means that the measures must be approved by Parliament in June.
Amongst the changes that need to be implemented are the VAT reform, which is to include two rates: a ‘low’ 11% rate for food, medicine and hotels and a 23% ‘standard’ rate for all products and services. Under this proposal all discounts and exemptions (such as for islands) must be eliminated.
The controversial ENFIA tax on real estate must remain in place, in order to generate revenue worth 2.65 billion euros in 2015 and 2016, irrespective of any changes to real estate tax values.
As for pensions, the institutions want to abolish all early retirements and phase out the non-pension solidarity grant (the ‘EKAS’) by the end of December 2016. The proposal also demands that legislation for a new pension system be introduced in September, which will unify all funds and establish a closer link between contribution and benefits.
Furthermore, the proposal requires a review of existing frameworks of collective dismissals, industrial action and collective bargaining, while taking into consideration practices in other European countries. Changes much also be introduced to increase competitiveness and open ‘closed professions’.
Changes must also be implemented in social benefits, in an effort to cut costs by 900 million euros (about 0.5% of GDP) annually. This includes family and disability benefits.
The lists of prior actions and policy commitments for Greece are available online.
