Greece has bought itself some time as it appeared before Euro Zone leaders on Monday to present new budget proposals, Reuters reports. The said proposals are hoped to become the basis to a long-awaited agreement that can keep the country from going into default.
Greece’s financial problem started all the way back in 2009, as found in a timeline report done by the BBC News. Back then, there was growing concern that several EU member states have started to have increasing debts. And true enough, Greece stated in December that year that its debt had already reached €300 billion. Moreover, Greece’s debt amounted to about 113% of its GDP. This led to the downgrading of Greek banks.
2010 was also bad for Greece, especially in January when it had to report that its budget deficit in 2009 was actually 12.7% and not 3.7%, as previously reported. This computation even got worse by April when the EU had realized that the actual deficit was actually 13.6%. In May of 2010, the IMF and Eurozone members came together to produce a bailout package for Greece that amounted to €110 billion.
The following year, the Eurozone also agreed to grant Greece a second bailout package, this time amounting to €109 billion. There was hope that the Greek crisis will be resolved soon enough. Later in the year, a summit was held to discuss Greece’s next bailout money and measures it can take to help banks in debt. After this, the Eurozone also approved an €8 billion loan in the hopes of keeping the country from defaulting.
As of the moment, the most pressing need the Greek government has is to be able to make a loan payment to the International Monetary Fund worth €1.6 billion (approximately $1.8 billion) before the month ends. Greece, however, does not have the money, says a report done by the Associated Press and published by US News. Instead, it is looking to claim the last installment of its bailout package from the Eurozone members and the IMF amounting to €7.2 billion. Without this money, Greece is expected to default.
The new proposal seems to be a cautious step in the right direction. In a copy of the Greek proposal obtained by Sky News, Greece has proposed several measures it can undertake to be able to produce more funds. Among them is a VAT reform, which Greece hopes will produce €1.36 billion by the following year. There is also the initiative to restrict early retirement, allowing the Greek government to save as much as €300 million. Meanwhile, pension contributions may be increased to bring in about €800 million and a new special corporate tax on high profits can let Greece earn €405 million.
The European Commission is very hopeful with the current round of talks, Reuters reports. During a news conference, European Commission President Jean-Claude Juncker has even stated, “I am convinced that we will come to a final agreement in the course of this week.”