Greece was urged to stay in eurozone

Alexander Saeedy and John O’Donnell report on the 10-point European Commission plan that has been published ‘in the interest of transparency and for the information of the Greek people’.

THE European Commission offered Greek voters a 10-point plan for bailout requirements, urging Greece to stay in the eurozone.

The list reflects the state of play as of 8 pm on June 26 and was never finished, because negotiations broke down when Greek prime minister, Alexis Tsipras, announced on Friday he would seek a referendum.

It’s being published now “in the interest of transparency and for the information of the Greek people”, Commission president Jean-Claude Juncker said on Twitter.

The list of measures was never finished or presented to eurozone finance ministers alongside an “outline of a comprehensive deal”, because of “the unilateral decision of the Greek authorities to abandon the process”, the European Union’s executive arm said.

The plans, published in English and in the process of being translated into Greek, were endorsed by the European Central Bank and the International Monetary Fund (IMF), the commission said.

The commission said the plans take into account Greek proposals from June 8, June 14, June 22 and June 25, as well as subsequent political and technical talks.

The Greek government hasn’t been informed of any change in the creditors’ proposals after June 25, if there has been one, a Greek government official said in an emailed statement.

IMF managing director Christine Lagarde said she briefed the IMF board on the state of play.

“I shared my disappointment and underscored our commitment to continue to engage with the Greek authorities,” Lagarde said in a statement. “I welcome the statements of the Eurogroup and the European Central Bank to make full use of all available instruments to preserve the integrity and stability of the euro area.”

Sales tax, pensions, and labour market reforms are among the measures spelled out in the creditor offer. The plan calls for Greek authorities to “recognise that the pension system is unsustainable and needs fundamental reforms”, to fully implement a 2010 pension law and to start introducing cuts from 2015.

Public wages, tax collection, and corporate taxation were also included. The measures are in a list of “prior actions” which Greece would need to pledge, in order to stay in the bailout program and get further aid disbursements.

“To those who wonder what’s next: One, Greece should stay in euro; two, the door is still open for negotiations on latest EU commission proposals,” European economic affairs commissioner Pierre Moscovici said in a Twitter message.

Below is an edited version of the 10-point plan put forward by European Commission:

1) Budget surplus

Targets for a primary surplus, as a percentage of gross domestic product, “1, 2, 3, and 3.5% of GDP in 2015, 2016, 2017 and 2018”.

The package includes Vat reforms, other tax policy measures, pension reforms, public administration reforms, reforms addressing shortfalls in tax collection enforcement, and other parametric measures, as specified below.

2) Vat reform

Adopt legislation to reform the Vat system that will be effective as of July 1, 2015. The reform will target a net revenue gain of 1% of GDP on an annual basis from parametric changes.

The new Vat system will:

Unify the rates at a standard 23%, which will include restaurants and catering, and a reduced 13% rate for basic food, energy, hotels, and water (excluding sewage), and a super-reduced rate of 6% for pharmaceuticals, books, and theatre;

Streamline exemptions to broaden the base and raise the tax on insurance;

Eliminate discounts, including on islands.

3) Fiscal structural measures

Adopt legislation to:

• Close possibilities for income tax avoidance (eg, tighten the definition of farmers)

Take measures to increase the corporate income tax in 2015 and require 100% advance payments for corporate income as well as individual business income tax by end-2016;

• Eliminate the preferential tax treatment of farmers in the income tax code;
• Abolish subsidies for excise on diesel oil for farmers and better target eligibility to halve heating oil subsidies expenditure in budget 2016
• Adopt outstanding reforms on the codes on income tax, and tax procedures;
• Introduce a new criminal law on tax evasion and fraud, plus modernize and broaden the definition of tax fraud and evasion to all taxes;
• Increase the rate of the tonnage tax and phase out special tax treatments of the shipping industry.

On healthcare, effective as of July 1, 2015:

• Re-establish full INN (generic medicines) prescription, without exceptions;
• Reduce as a first step the price of all off-patent drugs to 50% and all generics to 32.5% of the patent price, by repealing the grandfathering clause for medicines already in the market in 2012;
• Review and limit the prices of diagnostic tests to bring structural spending in line with clawback targets;
• Collect in the full the 2014 clawback for private clinics, diagnostics and pharmaceuticals, and extend their 2015 clawback ceilings to 2016;

Launch a social welfare review under the agreed terms of reference with the technical assistance of the World Bank to target savings of 0.5% of GDP, which can help finance a fiscally-neutral gradual roll-out of a guaranteed minimum income (GMI) in January 2016.

Adopt legislation to:

• Reduce the expenditure ceiling for military spending by €400m with a targeted set of actions, including a reduction in headcount and procurement
• Raise the corporate tax rate from 26% to 28%;
• Introduce tax on television advertisements, and announce an international public tender for the acquisition of television licences;
• Extend luxury tax on recreational vessels in excess of 10 metres and increase the rate from 10% to 13%;
• Extend Gross Gaming Revenues (GGR) taxation of 30% on video lottery terminal (VLT) games, expected to be installed at second half of 2015 and 2016;
• Launch the tender process for the issuing of 4G and 5G licences.

4) Pension reform

The EC has warned that the pension system is unsustainable and needs fundamental reforms.

It proposed, that effective from July 1, 2015 the authorities will phase in reforms that would deliver estimated permanent savings of 0.25% to 0.5% of GDP in 2015 and 1% of GDP on a full year basis in 2016, adopting legislation to:

• Create strong disincentives to early retirement, including the adjustment of early retirement penalties;
• Progressively raise statutory retirement age to 67, or 62 and 40 years of contributions, by 2022, applicable for all those retiring (except arduous professions, and mothers with children with disability);
• Increase the health contributions for pensioners from 4% to 6%.

5) Public Administration

• Reform the unified wage grid, effective January 1, 2016;
• Reform non-wage benefits, such as leave arrangements, travel allowances and perks;
• Hire managers and assess performance of all employees
• Publish a revised Strategic Plan against Corruption by July 31, 2015.

6) Tax administration

• Adopt legislation to establish an autonomous revenue agency;
• Combat fuel smuggling, via legislative measures for locating storage tanks (fixed or mobile);
• Produce a plan to tackle tax evasion and undeclared deposits, by checking bank transactions in Greece or abroad, with a view to recover unpaid taxes;
• Develop a costed plan for the promotion of the use of electronic payments, making use of the EU Structural and Investment Fund.

7) Financial sector

• Amendments to the corporate and household insolvency laws including to cover all debtors, and bring the corporate insolvency law in line with the OCW law;
• Amendments to improve immediately the judicial framework for corporate and household insolvency matters;
• Legislation to establish a regulated profession of insolvency administrators, not restricted to any specific profession and in line with good cross-country experience.

8) Labour market

Launch a consultation process similar to that foreseen for the determination of the level of the minimum wage to review the frameworks of collective dismissals, industrial action, and collective bargaining, taking into account best practices elsewhere in Europe.

9) Product market

• Implement all the pending recommendations of the OECD re truck licences, beverages and petroleum products;
• Open the restricted professions of engineers, notaries, actuaries, and bailiffs, and liberalise the market for tourist rentals and ferry transportation.

10) Privatisation

• Approve the Asset Development Plan which will include privatisation of all assets, including regional airports and the ports of Pireaus, Thessaloniki, and Hellinikon.