Greek government races for compromise with creditors

ATHENS – Anadolu Agency

AP photo

The Greek government is racing to draft measures intended to achieve a compromise with the country’s European creditors, so that much-needed bailout funds may be released.

But the government has to work fast, as the Eurogroup has set a deadline of Nov. 16 for an agreement that would provide the next 2 billion euros ($2.17 billion) in bailout funds. 

An agreement could also lead to the provision of 10 billion euros ($10.71 billion) to recapitalize Greece’s major banks.

The challenge for the Greek government is that much of what creditors want to see is not popular. The thorny issues in question include a bill for the protection of persons having difficulties paying their mortgages; a tax on private education; tougher conditions for tax and social security debtors; and the establishment of a minimum consumer price for generic drugs.

One of the most difficult challenges for the government is to reach an agreement with creditors on bad mortgages.

Athens is now preparing a new proposal concerning the protection from foreclosure of households struggling with mortgage repayments, as a compromise to meet creditor demands on faster repayment. It is based on two criteria: The debtors’ income and the value of their residence.

In this proposal, leaked to the Greek press on Nov. 11, the appraised value of the debtor’s residence must be no more than 180,000 euros ($192,875). That amount increases by 50,000 euros ($53,639) for a married couple and by another 25,000 euros ($26,817) for each child in a family, of up to three maximum.

But this proposal protects only about 55 percent of the households in debt compared with the 99 percent protected under the previous rules.

The measures being drafted also fix tougher conditions for individuals who owe tax and social security payments. These debtors are permitted to catch up on payments in installments. The creditors had requested that a debtor who has missed an installment payment be given less time to make it up before losing the right to pay in installments altogether. Currently a debtor has 26 days to make up a missed payment; the creditors want that reduced to one day. The Greek government is proposing a gradual reduction of the grace period.

The Greek government also wants to scrap the proposal to tax private education. It proposes to make up the funds with a 0.05 euro tax on each ticket in the national lottery.

The government proposed on Nov. 12 to raise social security contributions by three percent to fund pensions, in line with creditor proposals for pension reform.

These measures have drawn harsh criticism from opposition parties. Prime Minister Alexis Tsipras, however, told the press after a cabinet meeting on Nov. 10 that the government has a “parallel program” aimed at easing the impact of austerity measures.