Greece remains open to reach “a mutually acceptable agreement,” and is prepared to bridge a budget gap but not by cutting pensions or raising taxes, the deputy prime minister said on Sunday after an attempt to reach deal with creditors collapsed.
Following the 45-minute meeting, deputy prime minister Yannis Dragasakis issued a statement claiming that the lenders’ representatives were not authorized to discuss anything other than demands for cuts of 1.8 billion euros per year (roughly 1 percent of GDP) to pensions and another 1.8 billion euros per year to be raised from increases or changes in value-added tax.
Blaming Greece's international creditors for the breakdown in negotiations, he said the Greek government had submitted complementary proposals that “fully cover” the fiscal gap and the primary surplus – the two major sticking points between the two sides.
Creditors, he said, had insisted on pension cuts and increases in VAT both worth 1% of GDP – or €3.6bn – to close the projected gap, measures that Athens regards as untenable for a population already pauperized by five years of biting austerity.
The comments came after the European Commission said on Sunday the talks between Greece and its internationa creditors did not succeed, in a statement released Sunday. “While some progress was made, the talks did not succeed as there remains a significant gap between the plans of the Greek authorities and the joint requirements of the commission, European Central Bank and IMF,” the statement said. These joint requirements amounted to up to 2 billion euros a year in permanent budget savings.
The two sides had come to an agreement on a target for the 2015 budget gap, a Greek government official told Reuters. But the lenders estimated a fiscal gap of 2.6% of gross domestic product (GDP) for 2016 which the Greek side opposed since it estimated a gap of 2% of GDP, the official said.
Concerning VAT Athens has proposed rates of 6.5, 13 and 23 percent in an effort to redistribute the tax impact and lighten the burden on lower income groups. But creditors want rates of 13 and 23 percent and are pressing for an increase in VAT on energy to 23 percent.
Greek officials flew to Brussels after prime minister Tsipras signaled he would soften his stance and accept painful compromises in return for promises to alleviate the country’s staggering debt. The Greek negotiators, who included deputy prime minister Yiannis Dragasakis, state minister Nikos Pappas and alternate minister for international economic relations Euclid Tsakalotos returned to Greece on Sunday night ready to participate in intense and possibly multi-day government meetings in Athens as Greece needs to secure a deal with its creditors within days if it is to avoid defaulting on a 1.6 billion euro payment to the IMF at the end of the month.
A government official who spoke to iefimerida.gr on condition of anonymity said that “the government will not sign any agreement including further cuts to pensions and salaries, if that happens the game is lost for Syriza”.
According to a Commission spokesman the final decision on whether the country is going to default is left to the euro zone ministers' meeting in Luxembourg on Thursday.