A day ahead of a make-or-break meeting of European finance ministers, Greece was sticking to its guns on Friday and refusing to give in to creditor demands for pension and tax reforms.
According to the latest counterproposal Greece submitted to the European institutions and the International Monetary Fund that jointly administer its €240 billion bailout, the country’s far-left government insists on enacting a one-off 12 percent tax on corporate profits above €500,000 and a rise in employee pension contributions.
The IMF has repeatedly criticized the proposed measures, fearing they would push Greece’s economy deeper into recession. It wants the country to raise the retirement age faster instead and phase out a “solidarity grant” for the poorest pensioners in order to avoid steep tax increases.
Saturday’s summit of finance ministers is seen as Greece’s last chance to secure the final €7.2 billion tranche of its bailout. The country needs the money to pay off a €1.5 billion loan from the IMF — or enter default.
On Thursday, Germany’s Wolfgang Schäuble, one of Europe’s most hawkish finance ministers, told colleagues the creditors’ latest plan was already too lenient.
Later that day, Mark Rutte, the Dutch prime minister, reportedly urged Greece’s Alexis Tsipras to compromise. “Politically, we cannot water down the offer any further,” he said.
Tsipras, who was elected in January on promises to end austerity, is stuck between creditors who insist Greece makes liberal economic reforms and spending cuts to qualify for aid and an inexperienced, radical party that is resistant to any compromise with institutions it blames for impoverishing the Balkan country.
Greece’s demands for relief from austerity measures it previously committed to enact have exhausted the patience of its creditors.
Tsipras found few allies at Thursday’s European Council summit. The leaders of Ireland, Portugal and Spain, who have had to implement tough spending cuts and reforms of their own to qualify for financial support, were especially unsympathetic.
Adding urgency to the crisis is the precarious state of Greece’s financial sector. Fearing default and a possible Greek exit from the eurozone, savers have withdrawn billions of euros from their bank accounts in the last week. Usually, only between €200 and €300 million is taken out of Greek banks on a given day.
The European Central Bank provides emergency funding to Greece’s banks. But if no agreement is reached on the future of its bailout this weekend, the bank may be hard-pressed to justify continuing support while eurozone parliaments would be unable to return from summer recess in time to debate and approve a deal.