May 29, 2015

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Euro Working Group says only 7 days for a deal

There are only 7 days remaining to achieve a deal, according to the Euro Working Group, otherwise we are back to the old memorandum. The Greek representative Giorgos Houliarakis was advised that unless Athens can reach an agreement with the institutions in the next few days there may not be enough time for eurozone parliaments to approve a deal before the end of June and ensure there is a disbursement, according to Kathimerini.

The Greek side does hope to get a deal done by Sunday, though the Brussels Group says that there is still some way to go. Euclid Tsakalotos admits that at the technical level there will never be total convergence though both sides were drawing closer together, and a final “trade-off” would have to take place between senior political figures, according to the Guardian. 

Alexis Tsipras held a one-hour conference call with Angela Merkel and Francois Hollande yesterday. The exact content of the conversation remained unclear but Kathimerini writes that Tsipras might have asked Merkel and Hollande to make good on a pledge they made at an EU leaders’ summit in Riga last week to help overcome potential obstacles in the negotiations. The Wall Street Journal quotes a Greek government official saying that the Greek prime minister will have constant communications with other leaders to facilitate an agreement.

Athens made a fresh proposal regarding new value-added tax rates at Thursday’s meeting of the Brussels Group with the aim of increasing revenues this year by €850m, even though lenders are looking for a boost of €1.8bn. Sources told Kathimerini that the Greek government proposed a low rate of 6% to 6.5% for medicines, a medium rate of 10% to 11% for food, electricity and possibly tourism, and a top rate of 21% to 22% for all other goods and services. However, lenders are thought to favour just two rates and most items to be taxed at the top rate.

Yanis Varoufakis' statement that “there can be no commitment ad infinitum” in reference to the lower VAT rate on the islands, was interpreted by To Vima as meaning that there will be no changes in the summer season, at least until the 1st of September.

Talks are due to continue over the weekend, with the focus on this year’s fiscal gap, pension reforms and the liberalization of product markets. 

To Potami and Pasok vowed to vote for any deal in parliament, if only there is one, according to this article and twitter.

The IMF confirmed Thursday that Athens had the right to ask for “bundled” repayments next month, according to the Washington Post. There are currently 4 payments due up to June 19. IMF spokesman William Murray said Greece has not requested such a bundling and added that the last country that did was Zambia three decades ago.

Christine Lagarde gave an interview to the FAZ, and the headline of the corresponding article, “Lagarde does not rule out euro exit for Athens,” went viral in the internet, picked up by newspapers around the world. But reading through the article and the interview, we found nothing that warrants such a headline. All Lagarde said was that no one wishes Europeans a Grexit. She reiterated that the IMF does not want half-baked solutions, and that a comprehensive deal in the next days is highly unlikely, though there might be enough progress for the Europeans to proceed. If anything, the headline says something trivial everyone knows already, that one cannot exclude that accidents happen, but that was not the message Lagarde wanted to convey.

We have reports from Athens, meanwhile, that tax collection is descending into total chaos. Confusion and handling errors mean that only a few tax declarations have been handed in so far despite the end-of-June deadline. Kathimerini writes that 200,000 businesses are unable to file their declarations as the online platform for that transaction has not yet opened. There is also a strong possiblity that the system will crash once it is online. Accountants say it is impossible for more than 6 million statements to be submitted within one month, as the system cannot even handle 120,000 statements per day, let alone 200,000. Last year, tax payers were requested to file their declaration during the night, to ease pressure on the system. Meanwhile, tax revenues are showing a shortfall of €900m. Despite the muddle, Alternate Minister Nadia Valavani was against an extension of the June 30 deadline.

Our other stories

Today we also have stories on the new risk identified by the financial stability review; whether Ukraine has defaulted; the Spanish national accounts; which countries are lagging behind on banking union; and why France will not accept treaty change.

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