Greek Prime Minister Alexis Tsipras on Monday committed his deeply indebted country to a slate of tough new austerity measures and reforms that have proved elusive for years.
The promises extracted from the Athens government in exchange for negotiations with Eurozone partners on a proposed $96-billion bailout — Greece’s third in five years — are more daunting than those rejected by Greek voters in a July 5 referendum. But with banks closed and on the verge of collapse and commerce at a standstill, the government appeared to have little choice but to accede to its creditors' demands.
Tsipras and his radical leftist Syriza party came in for harsh criticism from the leaders of European Union countries that use the euro, who accused him digging Greece even deeper in debt in the six months he has been in power. The only concession wrested from the creditors during all-night talks was a hint that they might give Greece a break on repayment of the $270 billion it owes the International Monetary Fund, the European Central Bank and the European Commission.
Here are the steps the Greek government must take, and a fractured Parliament must approve, before fellow Eurozone members will formally negotiate a new schedule of loans, as outlined in a statement from European Union headquarters in Brussels:
• Streamline the value-added tax system and broaden the tax base by eliminating exemptions in certain service industries and businesses operating on tourism-dependent Aegean islands.
• Revamp the pension system, raising the retirement age to 67 and dissuading those already eligible to retire at 62 from doing so by reducing the amount of early-retirement pensions.
• Safeguard the full legal independence of ELSTAT, the Greek statistics office accused of misreporting finances in the past.
By July 22:
• Overhaul procedures and arrangements for the civil justice system that should significantly accelerate the judicial process and reduce costs.
• Implement the European Union's Bank Recovery and Resolution Directive, with the assistance of the European Commission, to prepare the nearly empty Greek banks for resumed cash infusions from the European Central Bank and prevent a run on deposits once they reopen.
Additionally, with a “clear timetable” to be determined later:
• Carry out further pension changes by October so that no deficit financing is necessary, or come up with unspecified alternatives to alleviate the strain placed on the national budget by 2.65 million Greeks on the pension rolls, or 24% of the population. With a 26% unemployment rate in the country, nearly half the population is dependent on retirees’ income for their welfare.
• Relax state controls on business and industry by allowing Sunday trade, pharmacy ownership and competition in previously closed professions such as dairies, bakeries and ferry transportation.
• Privatize the electricity monopoly.
• Undertake rigorous review of the labor market to align it with European best practices, and to modernize collective bargaining, management and termination procedures.
• Strengthen the financial sector, including decisive action on nonperforming loans and elimination of political interference.
• Scale up privatization by transferring at least $55 billion in valuable state property and businesses to an independent fund, using half the proceeds to recapitalize state banks and the rest to pay down debt and invest in growth.
• Produce by July 20 a plan to modernize, depoliticize and reduce the cost of the Greek civil service system.
• Allow creditor institutions to establish a monitoring presence in Athens to assess progress in implementing the necessary reforms.
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