By Peter Spence, and agencies 09 June 2015
Negotiators have submitted a new plan thought to include tougher austerity targets
Yanis Varoufakis, the Greek finance minister Photo: EPA/GREGOR FISCHER
Greece could be edging closer to a deal with its creditors after submitting fresh proposals which are thought to include concessions on tougher austerity targets.
Alexis Tsipras, the Greek Prime Minister, has reportedly agreed to consider measures previously deemed a "red line" in the debt talks. Namely, raising the rate of VAT. “I think we’re very close to an agreement,” he told Italian newspaper Corriere della Sera.
The new plan is also said to include a variety of financing options which could tide over the embattled economy and give the country until next March to reach a final deal.
One major Greek proposal was an idea, first floated by finance minister Yanis Varoufakis, for debt held by the European Central Bank to be transferred to the Eurozone's crisis-fighting fund, the European Stability Mechanism, which is widely seen as softer, sources told AFP.
The move would delay two major payments owed by Greece to the ECB this summer, allowing Athens urgently needed breathing space.
The Greek proposals have been received by the European Commission and are said to address creditors’ concerns about Greece’s budget targets and include a proposal to ensure the sustainability of Greek debt, according to Bloomberg.
Lenders “are now in the process of studying” the proposals, say AFP sources.
Valdis Dombrovskis, the European Commission vice-president for the euro, said Greece and its EU-IMF creditors could now reach a bailout deal in the coming days, according to AFP.
"I would say that reaching the agreement within coming days is possible, it's possible to reach a staff level agreement which then can be approved by the Euro group of finance ministers," the former Latvian premier told reporters when asked about the proposals.
Hopes that the standoff between a Syriza-led government and the trio of lenders may now come to an end have spurred investors and sent Greek stocks up by more than 2.9pc on Tuesday.
Jonathan Loynes, of Capital Economics, said that the new proposals “could give Greece and its creditors valuable time to meet the much bigger challenge of finding a last solution to its debt problems”.
“Previous arrangements to buy Greece time have proved counter-productive,” Mr Loynes said. “We continue to believe that only a major default can bring Greece’s debt to GDP ratio back down from 175pc to sustainable levels and secure its future inside the euro-zone,” he added.
Greece’s creditors want it to generate primary surpluses - achieving budget surpluses before debt interest payments.
But Mr Varoufakis has previously suggested that the primary surpluses demanded by creditors would be impossible to achieve. In an interview with Germany’s Handelsblatt, he said: “We offer them [Greece’s creditors] primary surpluses I don’t believe in, just to come closer to their positions”.
Speaking in Berlin on Monday, he said that the levels of austerity demanded by the country’s lenders were so severe that Greece would be unable to grow.
Mr Varoufakis said that the primary surpluses Greece was instructed to produce would require him to reach "into the guts, into the heart, into the substance of the private sector and extract so much out of it, that the private sector can not produce the growth".
"One reason that we haven’t reached an agreement, privately we’re being told that there’s a logic to what we’re saying, but politically, it’s very hard for the institutions to come out and admit it," he said.
Should Greece’s proposals be accepted by the institutions formerly known as the Troika - the International Monetary Fund, European Union, and ECB - the country may receive further bailout funds.
If a deal is not agreed, then looming debt obligations totalling around €10bn this summer are likely to be too much for Greece to handle. Unless progress can be made, the country will continue tiptoeing closer to eventual default, and a nasty exit from the Eurozone.
Mr Tsipras has warned that if Greece were to leave the Eurozone, it would be the “beginning of the end” for the common currency area. “If Greece fails, the markets will immediately go to look for the next one. If negotiations fail, the cost for European taxpayers would be enormous,” he said.