New Greek proposal gives hope to creditors
Greece submitted its latest proposals to its international creditors at an emergency summit of Eurozone leaders on Monday night, after failing to reach an agreement in the Eurogroup meeting that took place earlier in the day.
Read more: Eurogroup meeting ends without deal on Greece
In its proposal, Greece offered to cut its pension bill, to reform the VAT system to set the main rate at 23% and to raise the retirement age to 67 and curb early retirement, raising an additional €2.7bn in revenues this year in a move that was seen for many as the most positive development since negotiations began five months ago.
"We are seeking a comprehensive and viable solution that will be followed by a strong growth package and at the same time render the Greek economy viable," Greek Prime Minister Alexis Tsipras told reporters.
President of the European Commission Jean-Claude Juncker welcomed the proposal as “a major step forward” and added that the process would be finalised “by this week”.
Dutch finance minister Jeroen Dijsselbloem, who chairs the group of 19 Eurozone countries, said the Greek plan was “a basis to really restart the talks again and really get a result”.
European Council President Donald Tusk also showed his optimism towards the offer, while pointing out that now the aim was to make the Eurogroup finance ministers approve a cash-for-reform package on Wednesday.
German Chancellor Angela Merkel showed mistrust over reaching a final agreement with the Hellenic nation by this week. "I can't give any guarantee that that will happen," she said. "There's still a lot of work to be done.”
Officials from the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) will have to evaluate within the next 48 hours the Greek proposal and establish if Greece has met its creditors demands.
"We have a huge amount of work to do in the next 48 hours. We are not at all at the end of the route," Lagarde said on leaving the summit.
Meanwhile, the ECB will provide Athens with emergency liquidity assistance that will allow Greek banks to remain open, amid reports that €1.6bn was withdrawn from banks on Monday, after a record €1bn was pulled out last Thursday.
Read more: Greek bank deposit withdrawals top one billion euros in 24-hours
Greece will have to pay a €1.6bn repayment to the IMF on 30 June or reach a deal with its creditors before that date to unlock further aid.
OANDA Senior Market analyst Craig Erlam does not believe it was a coincidence that Greece made a proposal before defaulting its repayment.
"What we’ve seen over the last few months was probably carefully planned by Alexis Tsipras and his Syriza party as they tried to get tough with the country’s creditors," he said.
"It looks as if the high-stakes end-game is to be played out over the coming days, with some significant downside to credit spreads over the summer if a viable restructuring solution is not agreed (very) shortly," Danske Bank analysts believe.
Michael Hewson, chief market analyst at CMC Markets UK, said that there had been some shifting of the ground on the Greek's part, but added that the measures proposed by Greece may “sound rather counter-productive” when bearing in mind that the country remains with unemployment at record levels, and pointed out that an estimated 8,500 businesses have closed since the beginning of the year already.
“If this ‘tell me lies tell me sweet little lies’ mood will pay off this time around, remains to be seen,” commented London Capital Group's Jonathan Sudaria.
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