Cyprus Mail

Greek reform package worth 12 bln euros to offset recession

Greece is preparing a reform package worth 12 billion euros ($13.33 billion) over two years, more than previously planned, in an effort to offset a return to recession after months of negotiations with creditors, the Greek newspaper Kathimerini reported.

The left-wing government of Prime Minister Alexis Tsipras faces a Friday deadline to submit a reform-for-aid proposal that its European partners, if satisfied, would endorse on Sunday, averting a potential Greek exit from Europe’s single currency.

The report said that instead of growing by 0.5 percent this year, months of uncertainty and almost two weeks of capital controls meant “there are estimates of a recession of about 3 percent.”

“It is estimated that the measures of 8 billion euros that Greece had presented for 2015 and 2016 will have to be increased by 2 billion euros per year, raising the total to 12 billion euros for the two years,” Kathimerini reported.

Greece emerged last year from a deep recession that shrank its gross domestic product by a quarter over a six-year period, leaving a quarter of the workforce unemployed.

A second newspaper, Naftemporiki, detailed what it said were proposed tax hikes to find the money – an increase in corporate tax to 28 percent from 26 percent; a rise in VAT on luxury goods from to 13 from 10 percent; a rise in VAT on processed foods, restaurants, transport and some health services offered by the private sector to 23 from 13 percent; a VAT hike on hotels to 13 percent from 6.5 percent.

The report said Greek islands would continue to enjoy tax breaks that creditors had sought to scrap. Naftemporiki said the entire package would be worth 10 billion to 12 billion euros.

Such measures may face resistance from the hard-left wing of Tsipras’ Syriza party and from his junior coalition partner, the Independent Greeks, after the government campaigned for a resounding ‘No’ to more austerity in a referendum on July 5.

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